Borrowing money to buy something is usually a sign of not-so-good financial planning. Of course, there are some big ticket items that are unavoidable such as a house or a car that usually requires a loan to be taken. Sometimes though, people are just guilty of spending beyond their means and getting themselves into financial difficulties.
Even countries do that. Just look at Greece, their ballooning debt, and its inability to repay loans taken.
If you are desperate to get cash for whatever reasons and need a loan quickly, here are some options available.
We are not promoting their use. In fact, we much rather prefer that you don’t use any of these options. However, we will talk about them because they are better alternatives than borrowing money from a loanshark. So yes, it is the lesser of two evils.
Read also: Why borrowing from money lenders will always be a horrible idea
1. Loans from banks
There many types of loan packages offered by banks. A few examples include property financing, car financing and study loans. For this article, we will look at just personal loans.
In the current low interest rate environment, banks offer attractive promotional interests on personal loans. What are the advantages and disadvantages of it?
| Advantages | Disadvantages |
| Loan amounts can be quite large with a minimum of $1,000 to a maximum of $200,000. However, it is subjected to 2x to 6x your monthly salary. | Age restriction of 21- 65 years old and a minimum income of $20,000 – $30,000, depending on the banks and the loan packages. |
| Loan tenures can be long; from one to seven years | Lengthy paperwork requiredEg: Past 12 month CPF statement / 2 years of Income Tax Notice of Assessment |
| With the current low interest environment, the nominal interest rate is at an “attractive” 6% – 10%. However, the effective interest rate can be at least twice of that. | Processing fees that can either be a one off fixed charge, recurring charge, or up to 3% of the approved loan amount |
2. Pawnbrokers
With the listing of three pawnbrokers in the Singapore Exchange, the pawn-brokering industry has been on a revitalised run in the last four years. As more pawn shops are springing in heartlands, we shall examine the benefits of borrowing money from a pawn shop.
| Advantages | Disadvantages |
| No processing fees or tedious paperwork | Low value assessment of pawn items |
| No minimum or maximum loan amount | Loan amount depends of value of pawn item |
| “Low” monthly interest rate of 1.5%. Though, the annual interest rate runs to 18% | Generally, pawn items are limited to timepieces, gold & diamond jewellery |
| Fast cash | Loan amount is up to 6 months, though it can be renewed. Failure to repay or renew loan, could lead to the sale of the pawn item |
3. Credit Co-operatives
A credit co-operative is a financial organisation owned and controlled by its members, who can borrow at low interest rates from a pool of money that they have collectively saved as a group.
There are many credit co-ops, and for our example we shall use the rates from the Singapore Teachers’ Co-operative Society Ltd.
| Advantages | Disadvantages |
| One of the lowest interest rate of 3.5% p.a.(or 6% as with other co-ops) | Only open to its members |
| Loan repayments vary from 12 months to 60 months depending on the loan schemes | |
| A member may borrow up to 6x his/her monthly salary or $50,000, whichever is lesser |
Read also: How co-ops can be viable alternatives to commercial banks
We like to end this article by reminding readers to be prudent with their spending as once you have a mountain of debt, it will be a tough act to climb back up.
“Don’t buy things you can’t afford, with the money you don’t have, to impress people you don’t like” – Dave Ramsey.
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