Explore Financial Programmes and Alternatives in Singapore to Avoid Payday Loans

Payday loans are short-term, high-interest loans designed to bridge the gap between paychecks. While they offer quick access to cash, they often come with exorbitant interest rates and fees, leading to a cycle of debt. The impact of payday loans can be severe, trapping individuals in a spiral of borrowing. Fortunately, there are various financial assistance programmes in Singapore and alternatives, such as credit counselling and debt consolidation, which provide more sustainable solutions for those facing financial difficulties. 

In this article, we’ll discuss why you should avoid payday loans and provide you with alternative resources you can explore instead.

Singapore offers a range of financial assistance programmes to support individuals and families facing financial hardship. These programmes aim to provide a safety net and promote financial stability within the community.

Government assistance schemes

The Singapore government offers a comprehensive suite of financial assistance schemes designed to provide crucial support to citizens facing various economic challenges. These programmes aim to ensure that vulnerable individuals and families have access to essential resources and opportunities for financial stability.

ComCare

ComCare provides financial assistance to low-income individuals and families. This includes assistance with living expenses, medical bills, and other essential needs. They offer short to long-term assistance as well as interim help.

• Eligibility criteria:  

• At least one Singaporean citizen in the household

• Monthly household income per capita of S$800 and below

• Have little or no family support, savings or assets to rely on for your daily needs.

• Looking for work or temporarily unable to work due to illness or have to care for children, elderly or other dependants.

• How to apply: 

• Apply online via SupportGoWhere

• Visit your nearest Social Service Office to apply in person.

Workfare Income Supplement (WIS)

WIS supplements the income of lower-wage workers, helping them build up their retirement savings by providing them with cash payments and additional CPF contributions.

• Eligibility criteria:

• Singapore Citizen

• At least 30 years old (or any age if you are a person with disabilities)

• Earn a gross monthly income of at least S$500 and not more than S$3,000

• Own not more than one property and live in a property with an annual value of S$21,000 and below

• How to apply: 

• Automatically credited to eligible recipients' CPF accounts and/or paid in cash.

Community Development Council (CDC) Vouchers

CDC vouchers are distributed to Singaporean households to help with daily expenses at participating heartland shops and hawker centres. For January 2025, each household with at least one Singaporean can claim S$300 in vouchers.

• Eligibility criteria:

• One voucher per Singaporean household.

• How to claim: 

• Visit the website go.gov.sg/cdcv

• Login with Singpass and complete the redemption

• Only one member representing the household can claim the voucher digitally via Singpass

Employer and workplace support

Besides government schemes, employers and workplaces can also be a source of financial assistance. 

Salary advance programmes

Some employers offer salary advance programmes, allowing employees to access a portion of their upcoming salary before payday. These programmes can provide temporary relief during unexpected financial situations. 

However, it is important to understand any terms and conditions outlined by the employer to avoid further financial strain. Some potential terms and conditions to look out for include administration charges, and details regarding how the repayment will be processed.

Workplace financial assistance

Larger organisations or unions for certain industries may have internal financial assistance programmes or funds to support employees facing financial hardship. These programmes can offer loans, grants, or other forms of assistance.

Employees should check with their human resources department or union representatives for more information.

Non-profit and community organisations

Numerous non-profit and community organisations in Singapore provide vital financial assistance to those in need. These organisations often offer targeted support and address specific needs within the community.

Religious organisations

Many religious organisations in Singapore offer financial assistance to their members and the wider community. These organisations may provide aid with food, shelter, or other essential needs.

There are temples, mosques, and churches across Singapore that often have welfare funds or programmes to support their congregations and local communities. They may provide necessities like food rations or assistance with school fees.

Charity-based financial aid

Charities and social service agencies offer financial assistance to vulnerable individuals and families. These organisations may focus on specific groups, such as the elderly, disabled, or low-income families.

For instance, the Salvation Army offers a range of social services, including financial assistance, food aid, and elderly care. Additionally, the NTUC FairPrice Foundation provides assistance with food vouchers and other essentials, aiding those struggling with daily necessities.

>>MORE: Where to get financial assistance in Singapore for low income families

Aside from formal assistance programmes, you can adopt several practical strategies to help you manage urgent financial needs without resorting to payday loans.

Explore side-hustles and gig work to find quick cash

When facing unexpected expenses, it can be beneficial to explore creative avenues for generating quick cash:

• Sell pre-loved items on platforms like Carousell or Facebook Marketplace to declutter and earn money.

• Explore part-time or gig work opportunities, such as food delivery, ride-hailing, or freelance projects, for flexible income.

Apply for a credit card 

A credit card, when used responsibly, can provide short-term financial relief.

• Low-interest credit cards in Singapore offer a line of credit that can be helpful in emergencies.

• Many banks offer instalment plans on credit card purchases, allowing you to spread out payments.

• However, be aware that accumulating debt due to high interest rates on unpaid credit card balances can lead to further financial strain. Always ensure you make your credit card payments on time.

Try downloading a cash advance app

Salary advance apps, such as GajiGesa or Earned Wage Access (EWA) apps, offer alternatives to payday loans by providing access to a portion of your earned wages before payday.

• These apps typically charge lower fees and offer more flexible repayment schedules compared to traditional payday lenders, making them a potentially more manageable option.

• Similar to credit cards, which offer a line of credit for emergencies, these apps provide quick access to funds you’ve already earned.

• However, it's crucial to use them responsibly to avoid developing a dependency on such services, much like how responsible credit card use prevents accumulating high-interest debt.

• Always be mindful of any associated fees and ensure you can comfortably repay the advanced amount within the given timeframe.

Use Buy Now, Pay Later (BNPL) apps responsibly for new purchases

"Buy Now, Pay Later" (BNPL) services in Singapore offer another way to manage short-term expenses. These services allow you to split purchases into multiple instalments, often interest-free.

• Atome: A popular BNPL service, Atome enables users to divide their payments into three manageable, interest-free instalments, simplifying budgeting for everyday purchases.

• Grab PayLater: Integrated into the Grab app, Grab PayLater provides flexible payment options for Grab services, such as ride-hailing and food delivery, as well as purchases at partnered merchants.

• Hoolah: Hoolah allows users to split their purchases into three equal, interest-free instalments, making larger purchases more accessible.

• Rely: Rely offers instalment payment options, often without interest if payments are made within the agreed timeframe, providing a convenient way to spread out costs.

• Afterpay (formerly Clearpay): Operating globally and in Singapore, Afterpay allows users to split their purchases into four interest-free instalments, offering a straightforward payment solution.

Keep in mind that it is vital to keep track of all repayment dates when using BNPL services. It's easy to fall into the trap of overspending if you use too many BNPL services at once, as the small instalment amounts can mask the overall expenditure. Furthermore, these services typically have very heavy penalties for missed or late payments, which can catch users off guard and quickly lead to unexpected financial burdens.

Consider applying for an emergency loan instead

If you’re in a situation where you need a large sum of money quickly, emergency personal loans from banks or licensed lenders can provide a more structured and potentially safer alternative to payday loans.

• These loans typically offer more favourable interest rates and repayment terms compared to payday loans, reducing the risk of spiralling debt.

• Several reputable banks and financial institutions in Singapore offer emergency personal loans, including DBS, OCBC, UOB, and licensed moneylenders regulated by the Ministry of Law.

• When considering an emergency loan, carefully check the loan terms, including interest rates, processing fees, and any other associated charges, to ensure transparency.

• Always review the eligibility criteria before applying to avoid unnecessary credit inquiries, and assess your ability to comfortably meet the repayment schedule to prevent financial strain.

Understanding how payday loans can affect you is crucial for making informed financial decisions.

High interest and fees

Payday loans are often considerably more expensive than other credit options available in Singapore.

• The fees associated with payday loans can translate to extremely high effective interest rates (EIR), often far exceeding those of traditional loans or credit cards.

• Understanding the EIR, which reflects the true cost of borrowing, is essential for comparing loan options in Singapore and avoiding costly traps.

Potential to create a cycle of debt

The short-term nature and high interest costs of payday loans make them difficult to repay, often leading to a cycle of debt.

• Many borrowers find themselves unable to repay the loan within the short repayment period, forcing them to take out another loan to cover the previous one.

• Rollovers, where the loan is extended with additional fees, can quickly lead to excessive and unmanageable debt, compounding the initial financial problem.

Payday loans do not build credit

Unlike loans from licensed financial institutions, payday loans from money lenders do not report to credit bureaus, meaning they do not contribute to building a credit score, which is essential for accessing future credit in Singapore.

• Avoid borrowing from unlicensed lenders that operate outside of regulatory frameworks, which can leave you vulnerable to unfair practices and potential scams.