The word “moneylender” conjures up idyllic images of pigs’ heads stuck on doors and O$P$ spray painted in red in HDB corridors.
But licensed moneylenders (i.e. legal ones, unlike your friendly neighbourhood loanshark) are less predatory and might actually be a sane option if you desperately need cash but aren’t able to get a personal loan from a bank.
But just because they’re not illegal doesn’t mean you should go around taking out personal loans from them without understanding what you’re getting into. Here’s the lowdown on this catchily-named moneylender.
What is Friday Finance?
Friday Finance is a personal loan service operated by IFS Consumer Services, a licensed moneylender. Unlike Ah Longs, they have a license from the Monetary Authority of Singapore (MAS) to operate moneylending activities in Singapore.
MAS imposes regulations on licensed moneylenders, preventing them from charging exorbitant interest rates, penalty fees and administrative fees.
This doesn’t mean their loans are cheap. But, it also means they can’t get away with charging ridiculous sums like 400% interest or resort to horrific tactics to get you to pay up.
Since Friday Finance is a legal business, they’ll be more careful to stay on the right side of the law when trying to recover debts from defaulting borrowers. That means no pigs’ heads.
If you are having trouble repaying your loan, you can call Friday Finance directly and discuss the repayment terms, rather than change your name and secretly move out of your home.
Who is eligible for Friday Finance personal loan?
You must be a Singapore Citizen or Permanent Resident to take out a Friday Finance loan.
The amount you can borrow depends on your annual income. If you earn less than $20,000 a year, you can only borrow up to $3,000 in unsecured loans. Otherwise, you can borrow up to 6 times of your monthly income in unsecured loans.
Friday Finance offers 3 key loan types:
Life-Stage Loans for things like marriage, renovation or further studies
Start-Up Loans to alleviate start-ups’ cash flow issues
Income Advance for freelancers or variable income earners; this loan can offer your expected salary or payments if your clients or employer are late in paying up
Applying for a loan is a straightforward process. Register for an account on their website with your Singpass, and then set up an appointment to sign the loan contract documents in person. You will receive the money on the same day you sign the contract.
The key advantage of using Friday Finance is that getting approved for a loan is very fast and easy. They cater to people whose loan applications would be rejected by banks, like freelancers or self-employed people who might face trouble due to their lack of income records.
What are Friday Finance’s personal loan interest rates?
Friday Finance charges reducing interest, which means that you get charged interest only on your outstanding principal amount, rather than the entire principal (or worse, principal + interest like you’d pay on your credit card bill).
That means you can reduce your interest rate by repaying as much as possible, as early as possible. You can also opt to pay weekly rather than monthly instalments, which you should choose if you can afford it, as it will help you save on interest.
Friday Finance charges interest rates starting from 1% a month, and a 2% admin fee.
Wow, so cheap, 1% only, you say? Take note that the 1% interest rate being quoted is monthly, while interest rates are usually expressed as annual rates. A 1% weekly interest rate is equivalent to about 12.68% per annum.
Let’s take the example of a $10,000 loan with a loan tenure of one year. Friday Finance would charge you an interest rate of 18% per annum and an administrative fee of 2%.
Pay all your monthly instalments on time and you’d actually be paying an effective interest rate of 13%-ish, since the amount of interest you pay as a percentage of your principal gets lower as you repay more of your loan.
How do you repay Friday Finance personal loan?
You can pay your monthly instalments by GIRO, PayNow or bank transfer. There’s no early repayment penalty, so you should try to pay as much as possible to reduce your interest.
As an added bonus, if you pay all of your instalments on time, you receive a 50% refund on the 2% admin fee.
But what happens if you’re not such a goody two shoes and end up paying your instalments late? Late repayment will affect your credit score negatively, which might make it more difficult for you to take out future bank loans.
If you are having trouble repaying your loan, contact Finance Friday so they can work out payment options that won’t decimate your credit score.
What is Friday Finance loan protection insurance?
All secured Friday Finance loans are covered by loan protection insurance, which offers personal accident protection.
If you die or become totally and permanently disabled due to an accident, you’ll be insured for the outstanding balance of your loan, meaning you and your family will not have to worry about making further repayments.
If you become totally and temporarily disabled in an accident, you’ll be covered for up to two months of loan instalments or $400 a month, whichever is lower.
Friday Finance vs bank personal loans: what’s the difference?
Friday Finance loans are a lot faster and easier to apply for than bank loans. They are more lenient when assessing your eligibility for a loan, so if you have a poor credit score or a volatile income, you stand a better chance with Friday Finance than a bank.
The loans are also disbursed extremely quickly, with approval usually taking only one or two hours upon receipt of your application. Once your application is approved, you’ll be notified by SMS and can book an appointment to sign the contract as soon as you like.
Some banks, on the other hand, can take 2 to 5 business days to approve and disburse personal loans. That said, a few banks now offer almost-instant personal loans.
Friday Finance loans are also more flexible than bank loans. There is no pre-payment penalty, so you can feel free to pay off the loan more quickly in order to reduce interest payments. Bank loans often slap pre-payment fees that eat into your cost savings if you pay off the loan early.
On the downside, the interest rates and administrative fee Friday Finance charges are high compared to banks’ personal loans. If you don’t need the cash in a hurry, you might want to compare personal loan interest rates and try your luck at a bank instead.
That said, do note that interest rates for such loans are usually calculated on a personalised basis, so there is no guarantee you’ll get the best advertised rate.
Final note: Be cautious with personal loans
Despite its cheery TGIF-inspired branding, you should be very careful before taking out a loan with Friday Finance.
They might not be a loanshark, but the cost of borrowing from them is still quite high. To put things in perspective, their loans are cheaper than credit card debt, but expensive compared to personal loans from banks. If you do borrow from them, you should aim to repay as much of your loan as early as possible.
In general, personal loans should be used as a last resort. That means you turn to them if your only other options are credit card debt or loansharks… just kidding, the latter is NOT an option.
To avoid getting into high interest debt in the first place, it can be helpful to take a good hard look at your monthly spending, work out a budget that gives you some wiggle room, and put aside an emergency fund containing a few months’ worth of expenses.
That way, you can dip into your emergency fund or savings when unexpected expenses arise rather than resort to loans.
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