Instant Online Loans – How Do They Work?

Alevin Chan

Alevin Chan

Last updated 25 March, 2022

Instant online loans are a quick and convenient way to get the funds you need in a hurry. Here’s what you need to know before applying for one. 


Instant online loans are a form of personal loans that are convenient and speedy. You can send your application digitally and get the funds transferred directly into your account. 

You can also receive several loan offers at one go, which is helpful if you want to do some comparison shopping before signing up. 

Here’s a guide to instant online loans in Singapore, how they work, and what you should watch out for when using one. 

Are instant online loans the same as personal loans?

Essentially, yes. 

Instant online loans are granted on an unsecured basis, so there’s no need for collateral or security to be put up. 

You are free to use the funds at your discretion, and will need to pay back the loan in fixed monthly instalments. 

Additionally, instant online loans require a creditworthiness check, which is conducted by the lender based on your credit history, income level, and existing debt level. 

Another similarity is that there is also an upper limit to how much you can borrow through an instant online loan.

In fact, many instant online loans are actually personal loans offered by the banks, so it's not surprising that both are essentially one and the same. 

However, do note that some other financial institutions such as licensed moneylenders also offer instant online loans. As long as the terms are competitive and reasonable, instant online loans from licensed moneylenders are perfectly viable options to meet your financial needs as well. 

Pros and cons of instant online loans

Pros Cons
Convenient and speedy way to get urgent funds Might be tempted to keep on borrowing
Application is simplified, especially with Singpass  
Easily and quickly compare across multiple loans   
Filters out dodgy or shady lenders  

Pros of instant online loans

The biggest advantages offered by instant online loans are the convenience, ease and speed with which you can get the funds you need. 

All you have to do is to fill in an online form indicating how much you want to loan, and for how long, and wait for the loan offers to be sent to you.

Once you have chosen your loan, your application will be processed, and the lender will get in touch with you to go over the finer details of your loan.

Because you can receive several loans from multiple providers, or even be able to compare different loans side-by-side, instant online loans allow you to comparison-shop and derive at the best offer available. 

Most instant online loan platforms work only with genuine, approved lenders such as banks and other financial institutions, screening out illegal or unregulated lenders on your behalf. This will help ensure that you do not fall prey to dodgy or shady terms. 

Cons of instant online loans

All this convenience can come at a price — you may be tempted to take a loan on a whim to spend on frivolous things, taking on unnecessary debt

Instant online loans are easily available, yes, but it is crucial not to look upon them as a source of fast and easy cash. 

Remember, your loan comes with interest charges and fees, which means you’re actually spending more than you may think. 

Also, failing to pay back your loan will affect your ability to get loans later on, when you really need one. 

Things to note when applying for instant online loans

Instant online loans count towards your Total Debt Servicing Ratio (TDSR)

Instant online loans are a form of unsecured debt, which means they count towards your Total Debt Servicing Ratio (TDSR)

In case you weren’t aware, the sum total of your monthly debt payments must not exceed 55% of your monthly income. Once this limit has been reached, you will no longer be able to take on any more unsecured debt.

More importantly, mortgage payments are also counted under the TDSR, which means that if you take on too many instant online loans, you may be hampered — or even prevented — from securing a home mortgage.

Borrow only what you can pay back

Instant online loans are structured with fixed repayment terms. 

Every month without fail, you will need to pay a fixed amount, which goes towards paying down your debt. You will need to continue making these payments every month, until you have completed paying off your entire loan

You can choose how long you want to take to repay the loan. The longer you choose, the lower your monthly payment amount will be. However, this also means you’ll be in debt for the duration of the loan. 

It is advisable to choose a loan tenure that is as short as possible, with monthly repayments that you can comfortably manage. 

Confirm who your lender really is 

The chances of this happening is rare, but you should still check the identity of the party that is actually lending you the money. 

This is to avoid inadvertently being caught up in some illegal or shady operation and finding yourself facing harassment, threats and extortion. 

If the lender is a third party, this should be clearly made known to you at all times — along with the identity of the loan provider.

Don’t be lured by the promise of quick cash and terms that seem too good to be true. Always use renowned, reputable platforms that work only with recognised, approved lenders such as banks. 

When in doubt, do not take up the offer, and simply walk away. 

Read these next:
Understanding Personal Loans: Why And When Should You Use It?
A Complete Guide To Unsecured Loans In Singapore – What Types Are Available And How Do They Work?
Are Personal Loans The Answer To Your Money Problems?
Best Personal Loans For Low-Income Earners In Singapore
Four Types of Personal Loans: What You Need to Know


An ex-Financial Planner with a curiosity about what makes people tick, Alevin’s mission is to help readers understand the psychology of money. He’s also on an ongoing quest to optimise happiness and enjoyment in his life.


Use a personal loan to consolidate your outstanding debt at a lower interest rate!

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