Unexpected expenses popping up is a problem many Singaporeans are familiar with. Whether it’s for an emergency car repair, a deal you can’t pass up, or just sorting out your bills until your next paycheck arrives, the dilemma often comes down to two popular financial options: taking out a personal loan or opting for a cash advance credit card.

Each has its pros and cons, and choosing the right one can significantly impact your financial health. This guide aims to give you clarity and insight so you can make an informed decision that aligns with your needs.

What is a Personal Loan?

A personal loan is a type of unsecured loan provided by banks, online lenders, and other financial institutions that you can use for a myriad of purposes.

Unlike secured loans, they don’t require collateral like your home or car. Personal loans are known for their fixed effective interest rates, repayment terms, and monthly payments. They offer a way to borrow a lump sum upfront, which can be useful for consolidating high-interest debt, financing big purchases, or covering significant expenses.

How Does a Personal Loan Work?

Applying for a personal loan involves submitting an application to a loan provider, who will then assess your creditworthiness. If approved, you’ll be offered a loan amount, interest rate, and term based on your credit score, income, and other factors.

The process can take anywhere from a day to a few weeks, but once approved, you’ll receive the loan amount in a lump sum. You’ll then need to make regular monthly payments over the loan’s term, which can range from one to seven years.

What is a Cash Advance Credit Card?

A cash advance is a facility provided by credit card issuers that allows cardholders to withdraw a certain amount of cash, up to a specific limit, from an ATM or bank using their credit card. It’s a quick way to access cash but is typically associated with high costs. A cash advance credit card option is very useful during emergencies when immediate access to cash is necessary.

How Can You Get a Cash Advance on a Credit Card and How Much Money Can You Withdraw?

To get a cash advance credit card, you may need a PIN from your credit card issuer, which you can obtain by contacting their customer service. The amount you can withdraw depends on your credit card’s cash advance limit, which is usually a percentage of your total credit limit.

Factors to Consider When Getting Cash Advance vs. Personal Loan

Before deciding between a cash advance or personal loan, think about the following:


Cash advances usually incur a fee of up to 6% of the amount withdrawn before interest starts piling up at rates between 24% to 29% per annum. On the other hand, personal loans offer more affordable borrowing options, with interest rates ranging from 7% to 15% per annum, making them a more affordable alternative for longer-term financing needs.

Loan Amount

The amount you need to borrow can also influence your choice. Personal loans are great for higher borrowing amounts compared to the limit offered by a cash advance on a credit card. That said, if you have a high credit limit, you can take advantage of that.


If you need cash immediately, a cash advance credit card may be the best option for you since you can get the money you need in less than a day. That said, if you have already developed a relationship with your bank and have taken out loans before, you may benefit from lesser wait times when applying for a personal loan.

Real-Life Examples: Cash Advance vs. Personal Loan

Let’s compare two individuals, both in need of S$5,000. For the sake of this guide, Person A and Person B will be choosing different options to secure this amount.

Scenario 1: Person A (Cash Advance)

Person A decides to take a cash advance credit card of S$5,000 from their credit card. The cash advance comes with a fee of 6% upfront, amounting to S$300 (6% of S$5,000).

The interest rate for cash advances is 28% per annum. Unlike personal loans, interest on cash advances starts accruing immediately.

  • Initial Fee: S$300 (6% of S$5,000)
  • Monthly Interest: The annual interest of 28% on S$5,000 is S$1,400. Divided by 12, the monthly interest is approximately S$116.67.
  • First Month Cost: S$300 + S$116.67 = S$416.67 (excluding repayment of the principal)
  • Total Cost after 1 Year: Including the initial fee, the total interest paid would be S$1,400, making the total cost S$1,700 on top of the borrowed amount. If Person A only pays the interest without reducing the principal, they would still owe the original S$5,000.

Scenario 2: Person B takes a Personal Loan

Person B chooses a personal loan of S$5,000 with an annual interest rate of 7% and a one-time processing fee of 2%. The processing fee amounts to S$100 (2% of S$5,000). The interest per annum on the loan amount would be S$350 (7% of S$5,000).

  • Initial Fee: S$100 (2% of S$5,000)
  • Monthly Interest: The annual interest of S$350, when divided by 12, gives a monthly interest of about S$29.17.
  • Monthly Repayment: Assuming the loan is to be repaid over 12 months, the monthly repayment towards the principal is S$416.67 (S$5,000 divided by 12). The total monthly payment including interest would be approximately S$445.84.
  • Total Cost after 1 Year: The total interest plus the initial fee is S$450, making the entire loan’s cost total to S$5,450.


Person A (Cash Advance credit card) will end up with a total cost of S$6,700 (including the S$5,000 principal to be repaid), with a substantial part of this being interest and fees. This does not consider the repayment of the principal amount, which would increase the monthly outlay significantly if attempted within the year.

Meanwhile, Person B (Personal Loan) will pay a total of S$5,450, including the repayment of the principal amount. This option not only provides a structured repayment plan but also significantly lowers the total cost due to lower interest rates and fees.

Considering the example above, you can see that while a cash advance might seem like a quick fix for immediate cash needs, it comes at a high cost due to huge fees and interest rates.

On the other hand, a personal loan, with its lower interest rates and fixed repayment plan, offers a more financially sound option for borrowing, especially for those who can wait a short period for loan approval and disbursement.

That said, the cash advance option is faster and more convenient for those in urgent need of cash. In reality, a lot of borrowers face the same problem as Person A, who, despite the higher cost of the cash advance credit card, still chooses this option because time is of the essence and they cannot wait for the approval process of a personal loan.

Alternatives to Consider When You Need Cash Fast

Cash advance credit card is not the only option available to you when you need cash urgently.

Payday Loan and Emergency Loan

As its name suggests, payday loans and emergency loans do wonders to tide you over until your next paycheck. They’re incredibly fast to secure, often requiring only proof of income and a bank account.

While payday loans offer the convenience of speed, they are known for their high interest rates. However, if used responsibly and paid back on time, they can be a good choice for short-term needs.

Licensed Moneylender

Turning to a licensed moneylender in Singapore is another option when you need cash quickly. In Singapore, licensed moneylenders are regulated and are required by law to charge no more than 4% per month, regardless of the borrower’s income or whether the loan is secured or unsecured.

While borrowing from licensed moneylenders can be more expensive than obtaining a personal loan from a bank, it offers a regulated and transparent loan worth considering.

Which One Should You Choose?

Your choice between a cash advance credit card and a personal loan should rely on your specific financial situation, how quickly you need the funds, and how soon you can repay the borrowed amount. Take time to weigh the costs, terms, and repayment capabilities before deciding.

The Bottom Line

Cash advance credit card and a personal loan are two of the most useful loan facilities Singaporeans take advantage of in times of need. If you’re ready to take out a loan, MoneyIQ loan matching capabilities can offer personalised loan options tailored to your needs. Get a personal loan offer today!

Published On: February 5th, 2024

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