Getting payday loans, pawning your items or a credit card cash advances can gets you cash in a matter of hours. These are especially useful when you find yourself in dire financial needs, but not all of them are the same. Choosing the right one may help in your financial situation depending on your needs and requirements. We will dissect each option one by one and you can decide the best for yourself.
What is Credit Card Cash Advances?
Basically, you can think of these as purchases you made, but instead of an item, you are buying cold, hard cash. This option can provide you with quick cash, probably much quicker than the other two options of pawning and payday loans, but there are a few things you need to take note of here.
Interest is charged on a daily basis
Yes, you read that right. Unlike your other purchases, a cash advances charges interest daily, from the day you made the withdrawal till full payment is return. There is no expiring date to the loan and user can choose to return whenever they are comfortable but interest continue to run on outstanding balance. But that’s not all, they also generally charge high interest rates (e.g. effective interest rate of 28% per annum from bank X). Compared that to payday loans’ interest rates (capped at 4% for moneylenders) and pawnbrokers’ interest rate (approx. 1.5 – 9%), and you will realise that you are paying more on interest rates alone if you did not manage it well.
There are also additional charges
Most banks also charge a cash advance fee. Again, an example from bank X shows us that an additional 6% of the transaction amount will be charged to our credit card when we take a cash advance from our credit card. Coupled that with the daily interest rate, and you must take into consideration before deciding on one. Most importantly, one needs to have a credit card with available credit limit to apply.
What is pawning?
You might have noticed that there is a sudden growth of pawn shops around your area, and you are not wrong about that. The number has growth twice since 2008 — from 114 to 228 now, much of it fuelled by MoneyMax and Maxi Cash. Pawn shop also provide a relatively quick source of money with a single caveat — you must have something valuable to act as a pledge for the pawnbroker compare to payday loans and credit card advances.
There are interest rates too
The pawnbrokers extend a loan to you by taking one of your valuables as a pledge but these loans are not interest-free. Here’s a list of interest rate from Singapore Pawnbrokers Association.
Simple arithmetic calculation will enable you to compute the interest due: One month: amount of pawn loan multiply by 1.50% Two months: amount of pawn loan multiply by 3.00% Three months: amount of pawn loan multiply by 4.50% Four months: amount of pawn loan multiply by 6.00% Five months: amount of pawn loan multiply by 7.50% Six months: amount of pawn loan multiply by 9.00% This list shows the interest rate you will have to pay if you choose to redeem your item.
You have about 6 months to redeem your item
A rule in the Singapore Pawnbrokers Association states that they will only keep the pledge for a maximum of 6 months, after which the pawnbrokers can choose to do what they want with the item and that includes selling them away to others. However, unlike payday loans and credit card advances, you do not owe the pawnbroker anything if you choose not to redeem your pledge. This meant that while pawning your items is a quick source of cash, you probably want to think twice about losing something that has personal significant value to you.
What are Payday loans?
A simple definition of payday loans — It is a short-term loan that allows a person to take up a loan amount based on their salary. There’s a minimum monthly income cap depending on the moneylender rules and borrowers who have a much higher verifiable income salary would be able to borrow higher amount. These loans are quick loans that are usually tailored based on your income level and your ability to pay back the amount borrowed within the month after getting your pay. So that you do not over borrow and have the means to service the loan to tight over the short term difficulty.
Moneylenders can’t charge more than 4% interest rates
This has to be one of the biggest change in the moneylenders industry. This meant that a moneylender cannot charge more than 4% interest rates in the eyes of the law. This was done to protect borrowers who may get cheated unwittingly by unscrupulous moneylenders charging extremely high interest rate which is not serviceable. Borrower also have to take note of a one-time administration fee of not more than 10% of the loan amount. This is slight higher than the credit card advance application fee of 6%. But no credit facilities is required in this application as long as borrower is having a full-time job and loan amount is within a healthy serviceable range of his/her salary. Now that you understand all about the various fast cash options in Singapore, you can do more research on your own and make sure you pick the right one that suits your own needs.
For more detail on payday loans or visit more at: https://loansingapore.com.sg/fast-cash-singapore-pawning-vs-payday-loans-cash-advances