Meet Fred, a school teacher living with his 80-year old mother, Anna. Despite being spry and active, Anna is not exempt from some of the common ailments that affect people of her age. So Fred stays with her to ensure she is well taken care of. On Thursday evening, Fred comes home to find that his mother has developed a swelling on her ankle, and needs a checkup to make sure that what ails her is nothing serious. Unfortunately, he’s short on money, but pay day is 6 days away. In a situation like this, Fred has a couple of options—one of them being applying for a personal loan, the other being a cashline.
Just like Fred, many others have encountered a similar conundrum. To answer this question, we’ll explore the differences between each to help you (and Fred) make an informed decision.
To put it simply, a cashline is a credit facility provided by financial institutions that allows an individual to borrow funds up to a predetermined credit limit. Unlike conventional loans, repayment for cashlines is flexible: depending on the arrangement with the loan provider, borrowers can repay the borrowed amount in days, weeks, or months. However there is a min repayment of 2-3% of the loan amount depending on the bank.
As opposed to a fixed monthly interest, with cashlines interest accrues daily, at rates that vary between lenders. Generally, however, they sit above 22% p.a. Which is about 1.83% per month.
We’ve written extensively on personal loans. For a more comprehensive overview, you can read our ultimate guide to the best personal loans in Singapore.
In short, a personal loan is defined as any loan disbursed into a borrower's personal bank account unlike purpose-specific loans such as an auto loan or a renovation loan that are paid directly to the dealer and contractor respectively.
They can be used for anything, including but not limited to medical emergencies, vacation expenses, or starting a business. It is this unique characteristic that makes them incredibly popular. Unlike cashlines, which accrue interest daily, personal loan interest is usually charged at the end of each month, with interest rates that vary anywhere between 1% to 8% depending on the financial institution.
We recommend opting for a cashline over a personal loan when you need access to funds for an emergency if you have expenses over a short period that can be covered quickly with a paycheck. This is because interest rates for cashline is significantly more than a personal loan but if you take it just over a few days, the interest can be quite minimal. A cashline may also appeal to those who prefer to pay interest only on the amount they intend to use, or those looking to pay the least amount of interest through careful planning. Although this is highly unadvisable.
Last but not least, choose a cashline if you simply prefer to have a revolving credit facility for repeated use. For example, as a freelancer looking to cover living expenses during periods of a slow month, or as a small business operator to manage unforeseen costs like equipment repairs or inventory purchases.
Personal loans might be preferable when you need a one-time lump sum to cover large, specific, expenses such as buying a car, a home or paying a medical bill.
They also come in handy if you wish to consolidate all existing debts for easier management and potentially lower interest rates. Speaking of planning, some find the personal loan fixed monthly instalment structure easier to budget and plan around as opposed to the variable amounts that need to be repaid with cashlines.
Both cashlines and personal loans have unique advantages, which, when played to their strengths, can effectively address various financial needs and goals, without compromising long-term financial stability.
If you’re unsure as to which of the two options is right for you, reach out to our experts for assistance. We’re always happy to answer your queries.
Apply now with Lendingpot to compare and contrast different loan offers from the various lenders on our platform. The unique competitive environment fostered by our platform ensures that financial service providers are motivated to offer the best financial solutions to consumers. A single application is all you need. Learn more.
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