Owning a credit card is very exciting, it opens up your world to the possibility of making purchases conveniently as well as enjoying several perks and benefits. In Singapore, many borrowers have chosen credit cards as a mode of payment because of the several advantages that can be enjoyed from using the card both locally and overseas.

If you have a card that gives you the option to withdraw cash, then you need to be aware that taking a cash advance is very costly and it should only be used as the last resort. A credit card should ideally be used as an instrument to make purchases, therefore, you should spend money that you already have in your savings.

Making a cash advance on your credit card is actually the same as taking a short term loan at a very high cost. It is definitely more cost effective securing a loan from a licensed moneylender. The comparison between getting a credit card loan and taking a loan from a licensed moneylender is explained in the points below.

1. Fees charged.

If you make a cash advance on your credit card, you will be charged fees immediately. The amount of fees depends on the amount you are withdrawing. In most cases, you will be charged $15 or 6% of the amount you have withdrawn, depending on which whichever is higher. This amount of fees will be charged each and every time you make a cash advance, and it can quickly accumulate into a very large amount.

On the other hand, if you apply for a loan from a licensed moneylender, you will be charged a small amount in processing fees only once when you are applying for the loan.


2. Interest rates.

The rates of interest on credit cards are known to be much higher than that of personal loans. Credit cards tend to charge a variable rate of interest, therefore, it is difficult to budget for the payments because you will not be able to determine the exact amount of interest you will be charged when you make a cash advance. Credit cards also charge interest that is compounded, which means that the debt amount can easily spiral out of control. If you choose to take a cash advance on your credit card, you will be charged interest each time you make a withdrawal, which is very costly.

On the other hand, personal loans from licensed moneylenders tend to have a fixed rate of interest on a monthly basis. This means that the monthly installments will be lower and you will also be able to budget properly for all your loan repayments since the figure is fixed. This is a much cheaper option than the credit card loan.


3. Credit score.

Your credit score is more likely to be impacted negatively if you decide to take a credit card loan. This is because your cash advances will reflect on your credit card statement and these amounts usually do not give a positive image about your spending habits. There is also the risk of surpassing your credit limit if you do not closely monitor the number of withdrawals made. This can lead to a bad credit rating.

In the case of acquiring a personal loan from a licensed moneylender, you will be able to build your credit rating as long as you make all your monthly payments on time. A good credit score will give you greater opportunities to access credit for bigger projects.


4. Amount of credit.

All credit cards have a monthly credit limit which is usually fixed by the lender. You will not be able to access any amount above the credit limit. If you happen to reach your limit before the start of the next payment cycle, then you will need to make an early payment redeeming some funds. This can prove to be an inconvenience if you want to make larger purchases.

Applying for a personal loan will give you access to a bigger amount of funds which can finance bigger projects. This will give you the opportunity to make better investments without the pressure of having to continuously monitor the monthly credit limit. Many licensed moneylenders will give you a loan amount based on your annual income and your credit score.


5. Flexibility.

Credit card terms are usually fixed and leave very little room for negotiation. This is especially true if you use your credit card to make a cash advance. Once you are given your credit limit and the due date for payment, you are required to honour those terms and conditions diligently. Failure to stick to the rules will earn you some hefty costs in penalties and interest. These rigid terms and conditions are usually a major source of stress for credit card holders.

However, when you apply for a personal loan, most licensed moneylenders are willing to be flexible with their terms to suit your needs. There is enough room to negotiate the terms of repayment as well as the loan period. This will make it easier for you to honour your monthly payments and pay off the debt faster.


From the above points, it is clear that it is much cheaper to take a loan from a licensed moneylender compared to taking a credit card loan.

In Singapore, if you choose to apply for a personal loan from a licensed moneylender, then you will need to satisfy the following eligibility requirements.

  • You need to be between 21 and 65 years old.
  • You should have an income of at least S$30,000 per year if you are a Singaporean or S$40,000 if you are a foreigner.
  • You need to have valid identification. Either an NRIC or a passport.
  • You need to have proof of your address, therefore you must present your utility bills that confirm your residence.
  • You will need your income documents, such as the latest pay slips or latest CPF statements.

Once you have satisfied all eligibility requirements you can conveniently apply online. Most licensed moneylenders will respond within one hour and the funds will be disbursed to you shortly after approval.

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