If you are considering a payday loan from a moneylender you should read the “Notes for Borrowers” (PDF) from the Ministry of Law Singapore.
Cash advances can be short term finance solution services provided by most credit card and charge card issuers and from certain borrowers’ current banks. Cash advance services allow cardholders to withdraw cash via either an ATM or over the counter at their financial agency of choice/bank, up to a certain limit. Think of it like buying cash with a credit card, as opposed to material goods.
Specifically ‘online’ cash advances can also refer to payday loans. Payday loan lenders offer short term loans for predominantly smaller amounts of funds than regular personal loans. Payday loans, or online cash advances, carry high fees and interest rates attached. Online cash advances can be used for emergency finances in a variety of situations, such as a car breaking down or an unexpected cost that didn’t fit the monthly budget. They are, however, not long term financial solutions, as they are regarded as expensive loans.
Online cash advances are usually still available to people with poor credit ratings, and may be an option for people struggling to acquire other forms of finance. This guide will explain what’s involved with an online cash advance, how prospective borrowers are able to compare and access one, and how to apply.
How does a cash advance actually work?
A cash advance is an advance of finance which is credited by a bank or lending institution. Online cash advances can be for as little as S$20 in instances where the borrower withdraws money from an ATM using a credit card. Larger facilities may be available as high as S$25,000 or more with an overdraft facility from the applicant’s current bank, subject to their financial situation.
Payday loan online cash advances are normally available from anywhere between S$100 and S$2,000, but can go as high as S$5,000. People often opt for these when they need immediate emergency access to finance as they are a short term and an expensive solution. This type of finance could be used to pay for emergency medical expenses or forgotten bills. They are, and should be, seen as a ‘last resort’ measure that can help customers to manage cash flow problems or money to see them through to their next payday.
Options for getting a cash advance
There are a few ways to take out a cash advance. Here is a breakdown of the facilities available:
- Overdraft. An overdraft facility is something that can be set up with a borrower’s current bank that is linked to their existing transaction account. An overdraft facility allows users to overdraw their account up to and including a certain limit. The limit will be agreed upon by the applicant and the bank and will depend on the financial position of the borrower. Some banks offer overdraft facilities in excess of S$25,000. For individuals who have negative marks on their credit file but a good relationship with their bank, an overdraft facility still may be an option in some cases. With an overdraft facility, users only pay for what they borrow.
- Credit card. People looking for a cash advance who already have a credit card may already have access to a cash advance facility. To access a cash facility using a credit card, simply withdraw cash from an ATM using a credit card – this money is be considered to be a cash advance. Keep in mind that the cash advance fees for credit cards are usually around 20% p.a. (higher than purchase rates) and that a credit check will apply. Some credit cards offer low cash advance rates, but these rates may still be higher than other forms of personal loan.
- Payday loan. A payday loan allows customers to borrow between S$100 and S$2,000 via a short-term loan. Payday lenders provide loans to individuals in a variety of financial circumstances, including those with poor creditworthiness. Typically, customers will have to make repayments on a payday loan in line with when they receive their pay. A payday lender can transfer funds into the borrower’s nominated bank account on the same day or by the next business day.
- Medium loan. For applicants who need more than S$2,000, they can consider a medium loan. These loans are still a form of short term payday loan, but give borrowers access to between S$2,001 and S$5,000, and occasionally even above S$5,000. Bad credit applicants can usually still apply.
In Singapore, the total amount of unsecured loans you can have – across credit cards, personal loans, etc., – is limited to 12 times your monthly salary. An unsecured loan is a type of loan where the debt isn’t secured against any asset, such as your car or home.
How to get a cash advance online
- Fill out an application online. Online cash advances require only a fully online process. There’s no faxing of documents and the lender usually just requires read-only access to the applicant’s transaction history and their credit file.
- Approval. This can take as little as 60 seconds. Applicants can find out via phone, email or SMS. Approval is subject to the credit provider’s eligibility criteria.
- E-sign a contract and receive the loan. Agree via SMS or email and then receive the money into a nominated bank account.
The cash advance process
The process to procuring a cash advance will differ depending on the method. For instance, for those who already have a credit card, a cash advance might just involve going to the ATM and withdrawing cash or transferring money from a credit account to a transaction account using online banking (this process may differ between providers). For those who opt for a different product, such as an overdraft facility or a payday loan, then the process will naturally be different. Whichever option, there are some factors to consider:
- Credit check. Responsible lenders are usually required to perform credit checks on all applicants as it is Australian law that all lenders are confident that approved applicants are offered the appropriate credit that they are realistically able to repay. Lenders who offer loans to applicants with bad credit will often still check credit scores. Some lenders may offer online cash advances without credit checks, but they will still require documentation to prove that applicants can repay, such as bank statements. Lenders who offer ‘guaranteed approval’ should be approached with caution, as this could be a sign that they are disreputable or irresponsible lenders.
- Employment verification. All loan applicants will be required to provide evidence of some form of income in order to qualify for any type of finance. This is usually as simple as verifying an applicant’s employment online. Unemployed applicants might still qualify for finance, but there may be additional criteria that they are required to meet in order to do so.
- Submitting documents. Online cash advance lenders offer a fully online application process that is usually fairly straightforward. These lenders still need to verify certain information about all of their applicants via their submitted documentation and their online banking details. Often, automated systems which check an applicant’s expense history without the need for statements, though some lenders may require borrowers to submit statements themselves online. Applicants may also be required to scan in and email copies of their driver’s licence, passport, etc. in order to verify their identity. Applicants can check the requirements of document submittal on our review pages or with the lender directly before applying.
What to be aware of
- Interest rates, fees and charges. The type of credit that someone needs plays a role in the costs that they will end up paying. Other factors that have a bearing on this include the creditworthiness of the borrower and the lender that they choose. Applicants should make sure that they are aware of any and all applicable fees.
- Advance term. The loan term impacts the cost of the loan. A longer loan term will increase the loan’s overall cost, but shorter terms mean higher repayments. The repayments offered with cash advances will differ depending on what facility is selected. For example, overdrafts have no set repayments and allow you to pay back the advance at your own pace, whereas a payday loan has very strict repayment terms that usually line up with the borrower’s pay cycle. It is important that all applicants calculate the frequency of their potential repayments and how they fit with their current budget, prior to submitting a finance application.
- Cash advance amount. Different cash advance facilities offer different loan amounts, so all applicants need to ensure that they will be able to get the amount that they need. Over-borrowing will end up with the applicant paying extra unnecessary interest.
- Pre-existing credit accounts. Borrowers might want to look at the overdraft facility offered by their current bank to see if they are likely to be approved for finance. For those who already have a credit card with an available balance on it, then this may also be a viable option and no application may be needed. All applications for new credit accounts show up on applicants credit files, so working with the cash advance facilities already at their disposal may prove beneficial for those who want to avoid potential damage to their credit score.
How much will it cost?
When borrowing with an instant loan online, applicants often pay the cost of convenience. Here is an outline of some fees and rates to expect:
- Credit card cash advance: Interest rates are typically between 19-22% p.a.
- Short term loan. A short-term loan of under S$2,000 may come with a 4% monthly fee and a 20% establishment fee, plus, the interest rate of the loan. Rates vary so make sure you check each provider’s terms and conditions with care.
- Medium loan. Quick advances between S$2,001 and S$5,000 may have a S$400 application fee and a rate of around 48% p.a.
- Overdraft. Overdraft users typically pay between 16-20% p.a. for an overdraft, plus ongoing fees.
Cash advance eligibility
Eligibility criteria differ between lenders, but generally, applicants will need to meet the following criteria:
- Are over the age of 21
- Earn a regular income
- Must be able to afford the repayments
How to apply for an online cash advance
To apply for a payday loan, you’ll need to do so via a lender’s website where an online application form will be hosted. To apply for an overdraft, borrowers can apply directly with their current bank or credit union. Fees and rates will differ between institutions, so contacting a provider directly is likely the best method of comparing options.
Some credit cards may be set up with cash advance facilities, and can be compared online.
And as always you should read the “Notes for Borrowers” (PDF) from the Ministry of Law Singapore if you are considering a payday loan.
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