Do you need to borrow money urgently? Can we actually borrow money online?
We all get into situations where we need some quick money to solve a financial crisis. A financial crisis can be anything ranging from a medical emergency or debt consolidation to a bill payment issue. It can be pretty stressful if you don’t know what your options for borrowing money are.
Sometimes, it is reasonable for you to get a personal loan. These are a few situations where it makes sense to apply for a personal loan.
Let’s have a look at five options you have to borrow money in Singapore so you can weigh the pros and cons and find out the option that fits the bill.
We will discuss these 5 places you can use to borrow money online in Singapore:
- Credit unions
- Peer-to-peer lending
- Credit cards
- Financing companies
A bank is perhaps the most convention source of money or loan for most of us. Banks have a wide selection of loans, all suited for different purposes with different interest rates, terms, and tenures, such as mortgages, personal loans, home loans, car loans, and so on.
Refinancing an existing loan at a better rate is also something that bank loans can help you out with.
Pros and Cons:
Doing business with your bank is indeed very easy. Beyond everything, they already have a relationship and an account there. Furthermore, the bank’s staff is available at your closest branch, which enables you to find quick answers and troubleshooting.
To make it easier these days, banks offer their online services in granting loans in a few easy steps. Also, copies of checks customers have written are made available electronically.
The downside of borrowing money from the bank is that banks can be hefty. It’s not rare to find a bank infamous for charging way higher interest rates or penalties than the norm.
2. Credit Unions
A credit union is a cooperative institution controlled by its members – the people that use its services. It usually tends to include members of a particular group, community, or organization to which one must belong to borrow.
Pros and Cons:
Credit unions offer many of the same services as banks but they are typically non-profit enterprises, which helps enable them to lend money at more favorable rates. In addition, certain fees may be cheaper or even non-existent.
On the downside, some credit unions only offer plain loans or do not offer the variety of loans that a bank does. And also, you have to join a credit union and open an account with it before you can borrow money.
3. Peer-to-peer (P2P) Lending
Also known as social lending or crowdlending – peer-to-peer lending is a method of financing that enables individuals to borrow from and lend to each other directly, without an institutional intermediatory, like a broker or a bank.
With peer-to-peer lending, you are generally looking at a higher risk than borrowing from a financial institution like a bank. If you go with moneylenders (though this way will rarely be completely online), only go with licensed moneylenders. Check the Ministry of Law’s list of licensed moneylenders in Singapore first.
People willing to lend money connect with individuals looking to borrow money via an online platform. There are plenty of P2P borrowing websites.
Pros and Cons:
A borrower might receive the full amount they are asking for or maybe only a portion of it. In the second scenario, the remaining amount is then funded by other investors on the lending platform.
For lenders, the loans generate income in the form of interest. The monthly interest payment a lender receives may even earn a higher return than a stock market investment.
For borrowers, P2P loans represent an alternative source of financing – especially useful if they are unable to get approval from standard financial intermediaries. Borrowers often receive a more favorable interest rate or terms on the loan than from conventional sources too.
Still, any consumer considering these lending sites should check the fees. These sites also charge fees and penalties. It helps to be aware of these charges.
4. Credit Cards
Anytime you use a credit card, you are in a sense of borrowing money; the credit card company pays the merchant for you, advancing you on the money, so to speak, and then you repay them when your card statement comes. But a credit card can also be used for actual funds, it is called a cash advance.
Pros and Cons:
A cash advance on a credit card may not be a bad idea if an individual needs to borrow a small amount of money for a short period of time. There are no application fees. For those who pay off their entire balance at the end of every month, credit cards can be a source of loans at a 0% interest rate.
On the other side, if a balance is carried over, credit cards can carry exorbitant interest rate charges as they work on compounding interest.
Not all credit card companies and types are equally generous with how much they lend to a particular individual. For those who need long-term financing, this can be a disadvantage.
In addition, if you borrow too much with credit cards or go over your limits frequently then this will ruin your credit score, which in turn will make it tough to get other loans from different sources.
Here are a few tips to avoid credit card debt in Singapore.
5. Financial Institutions
Financing companies are outfits dedicated to lending money. They routinely make personal loans to individuals or businesses needing funds.
Pros and Cons:
They usually offer competitive rates, though a lot depends on your credit score and financial history, and the overall fees can be low compared to banks and other financial institutions. And the approval process is generally completed fairly quickly.
Financial institutions like licensed moneylenders will often offer greater flexibility to their borrowers. This means that you might be able to loan a larger amount or get a bad credit loan.
They will also be able to provide professional financial services.
The Bottom Line
There are a variety of ways to borrow money online these days. Banks, credit cards, online lenders, finance companies are all institutions that offer loans. However, not all forms of borrowing are equal. Whether you are looking to finance your child’s education, a new home, or a car, always analyze the pros and cons of each potential source of capital available to you.
Lenders usually look at the credit score of the borrower. Some lenders might not prioritize it as much while others do. Generally, people with better credit scores are eligible for better and less riskier sources of loans, such as through a leading bank. Conversely, you are more likely to be eligible for riskier loans such as P2P lending or moneylenders with high interest rates if your credit score is poor.
Do not despair if you have a poor credit score. There are ways to improve your credit score.
Note that all types of borrowing have negative short-term ramifications for your credit score. Failing to repay on time also does a lot of damage to it. So, if your credit score is poor, it might be a good idea to let it recover a bit before you take another loan, especially if it’s not for an emergency or something urgent.