Pre-paying payday loans in Singapore: The Pros and Cons Explained

Pre-paying payday loans in Singapore
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Pre-paying payday loans in Singapore: The Pros and Cons Explained

checking blog post using mobile
Pre-paying payday loans in Singapore



Most people who take a loan give little thought to repaying it early. We are more concerned about having the money to pay the monthly instalments on time instead. However, no one enjoys being in debt and it can be tempting to prepay a loan if you come into some extra cash.

Payday loans are slightly different. They are characteristically very short-term loans and don’t involve repayment by instalments. Instead, the entire loaned amount plus interest is repaid to the lender when the borrower receives their next paycheck. This could be as soon as a week.

However, it is still possible to prepay a payday loan from a legal moneylender. The question is whether or not you should. We help you answer that question depending on your personality and your unique circumstances.


There are three main reasons that you may prefer to prepay a payday loan.


Credit limit

Your credit limit is calculated based on the current amount of debt you hold as compared to the maximum allowed for your credit score. The more debt you hold, the smaller your ability to get approval for a new loan, credit card, or overdraft. By clearing some of your debt immediately, you give yourself more room to manoeuvre.

Spending habits

Are you the type of person who makes impulse purchases? If you have problems with self-control when there is excess money in your wallet, it may be advisable to get rid of the temptation by prepaying your payday loans. Since it also settles the debt, this is like killing two birds with one stone.

Personal preference

Debt feels like a constant burden and no one enjoys that sensation. Prepaying a debt helps you resolve your financial obligations at the earliest possible opportunity. It may also make it easier to get approval for loans in the future from the same legal moneylender.


Here are the three main reasons that you should reconsider prepaying payday loans in Singapore.


Extra charges

Every lender charges fees for early prepayment. On the surface, this seems strange because we assume that they would want their money back as soon as possible. However, lenders earn money from interest and prefer that you stick to the agreed timeline. Additionally, prepayment involves administrative processes and these costs are passed on to the borrower.

Contingency funds

It is tempting to think that all your problems will be solved if you come into some unexpected money. However, it may be wiser to hold on to any extra money that you have as a contingency. If you use it all to prepay a loan when it isn’t necessary, you may find yourself unprepared for a future emergency.

Credit score

An oft-overlooked fact is how being in debt actually helps your credit score. In assessing someone’s credit rating, the algorithm considers the variety of debt that he or she holds.

A wider range of debt types indicates that the person is capable of managing complex finances. (Note, this only works if the borrower has not defaulted on the existing loans) If you plan to apply for another loan, it is better not to prepay so you maintain a higher credit score.

Is a payday loan right for you?

Payday loans in Singapore help thousands of people all over the country to put food on the table, keep the electricity running, and get to work or school. Because of their high-interest rates, though, these loans have a largely negative reputation.

Keep in mind that the right loan for you depends on your circumstances. Online fast payday loans are the best option during an emergency. They come with a fast approval process, conveniently performed online. Most good lenders will contact you within a few minutes of receiving your application. You could have your money within the hour.

For a one-off emergency, you may be willing to pay the high interest of a payday loan. If you have more time to compare and choose, loans with longer terms and lower charges may be the better option.

Either way, always make sure you understand what you are getting into before you sign a loan contract. A legal moneylender will take the time to explain the most important terms to you, but it is still your responsibility to abide by them all once the contract is signed.


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