How To Get Out Of Debt: The Singaporean Blueprint On Handling Your Finances

Personal Finance

How To Get Out Of Debt: The Singaporean Blueprint On Handling Your Finances

August 21, 2023

Living under a mountain of debt may strain our mental health. We may develop financial stress as well as relational stress of debt. By developing sound financial routines, you can lessen the likelihood of getting into serious debt.

With a solid record of on-time loan payments in Singapore and good monetary habits, you can get the credit and loans you require when you need them the most.

When in debt, what options do you have? Read this article to learn how to get out of debt and where to find assistance if you run into trouble.

Dodging Debt Snare In Singapore

The three major ways of getting out of debt in Singapore are asking your lender for a lower rate, considering debt consolidation or carrying out a balance transfer credit card.

To avoid the emotional stress of debt, there are a few critical things you must be familiar with and practice. When making a loan or bill payment, you should:

  • Prioritise loans and repay any debts with the highest interest rates.
  • You may avoid late fees and the hassle of remembering to pay your bills by setting up GIRO bill payments (General Interbank Recurring Order).
  • Settle credit card bills by making full payment before the due date to avoid late payment fees and interest charges.

When making expenditures:

  • Save for purchases that are expensive instead of paying them in instalments.
  • Resist impulse purchases. Always check and compare prices in different places beforehand.
  • Practice cash or debit shopping.
  • Avoid frivolous spending. Don’t surround yourself with individuals who try to pressure you to purchase.

Settling Debts In Singapore

Settling Debts In Singapore

Making punctual repayments will save you from a lot of trouble, such as accrued high interest and being denied loans when in need because you have a history of loan defaults. Here is what you should consider when repaying debts in Singapore:

Create A Spending Plan

Drafting a budget is the first step. Make a budget that details your monthly income and household costs, and determine where you may make cuts to reduce your debt.

If you’re having difficulties making ends meet, you must forego luxuries like going to the movies and eating at restaurants. Utilise the Budget Calculator for some assistance.

Inspect Your Financial Obligations And Consolidate Them

Don’t open up too many credit accounts. Instead, try to consolidate them. Repayment schedules are simpler to manage when there are fewer credit lines open.

Make Prompt Payments

Pay up your loan on schedule to avoid paying extra interest or fees. You should contact your bank if you anticipate any problems making punctual repayments.

If Possible, Make A Larger Payment

Suppose you find yourself in a financial position where you can pay off some or all of your loan early. You’ll be able to eliminate your debt much faster. Make sure you know the penalty fees and notice requirements of your bank.

Prioritise High-interest Debt Repayment

Here are some quick methods to get rid of debt, whether through credit cards, personal loans, or instalment plans. Do this until all of your debts have been paid.

  1. Sort your current loan balances by their annual percentage rates.
  2. The debt with the greatest rate of interest should be paid off first.
  3. If you can’t afford to pay the whole thing simultaneously, just pay what you can. Put money aside each month until it’s paid in full.
  4. Repeat the first step. Continue until all your debts are eliminated.

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Steps To Take If Unable To Pay In Singapore

Sometimes, you cannot repay your debt because of unavoidable circumstances. If that’s the case, you should get in touch with your Singapore bank right away. It’s possible they can assist you in renegotiating a new payment plan.

If you find yourself unable to make payments:

  • Your credit rating will suffer as a result. In determining whether or not to extend credit, financial institutions look at a borrower’s credit report, which includes a credit score and credit repayment history.
  • If you have a history of paying late, this could affect your ability to receive a loan in the future or increase the interest rate you would have to pay.
  • Ignoring the bank’s requirements and warnings will result in increasingly harsh penalties.

Importance Of Working With Your Bank

It is advisable not to disregard or neglect any incoming calls or correspondence from one’s financial institution, legal representatives, or debt collection agencies. Get in touch with them without delay.

Maintain a cooperative demeanour and ensure you are reachable. If an individual demonstrates a cooperative attitude, it is more likely that their financial institution will be inclined to assist them with bank restructuring options regarding their payment plan.

How Do You Handle Multiple Debts In Singapore?

Sometimes you have multiple debts, so how do you handle them? One should persevere and strive to enhance their financial circumstances on debt. Here are some things you can do:

One should persevere and strive to enhance their financial circumstances on debt. Here are some things you can do:

  • Obtain a credit report and evaluate the aggregate debt balance you will repay.
  • It is advisable to communicate with your financial institution. Explore consolidating your exceptional credit and unsecured loans into a structured debt repayment arrangement. This will allow for gradual payback of your outstanding debt through periodic instalments.
  • You should not combine and repay your debts by taking out a loan from various lenders without first calculating the total interest and fees you will accrue.
  • It is advisable to abstain from increasing the charges on your credit cards or depleting the funds available from your unsecured loans. Relinquish possession of your credit cards and terminate your credit accounts.
  • It is advisable to prioritise the repayment of loans with higher interest rates while exercising caution regarding potential penalties.

Where To Go For Assistance In Singapore

If you are in a debt trap, you can seek help in either of the two ways below.

  1. Credit Counselling Singapore. For assistance in resolving debt-related issues, it is recommended to contact Credit Counselling Singapore.
  2. Debt consolidation plan. Individuals with unsecured debts surpassing 12 times their monthly income are advised to consider applying for a Debt Consolidation Plan. 

Debt Consolidation Plan (DCP)

If an individual is burdened with significant debt, they may consider utilising a Debt Consolidation Plan as a potential strategy to improve their financial situation. The Debt-Refinancing Programme is an initiative undertaken by the industry.

How Does It Operate?

Using this strategy:

  • The consolidation of your outstanding unsecured loans from multiple banks is facilitated by transferring them to a single bank.
  • The interest rate is expected to decrease. You agree to pay a set amount each month until the total is paid in full.
  • Individuals can’t utilise their existing unsecured financing sources or new ones except for loans designated for education, medical expenses, or business purposes. Instead, they will be granted a concessional revolving unsecured credit line like a credit card. The credit limit provided is equivalent to one month’s pay, intended to cover daily expenses.

Who Qualifies For DCP?

Individuals who satisfy the following requirements are eligible to apply for the DCP:

  • You must be Either a Singaporean or you permanently reside in Singapore.
  • Make a yearly salary of $20,000 to $120,000.
  • Own no more than $2,000,000 in total personal assets.
  • Individuals with unsecured debts that surpass 12 times their monthly income.

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Bottom Line

Debt relief is very simple to achieve in Singapore. If you are having trouble paying back your loan, talk to your bank so that you can come up with a solution that works for both of you. Don’t disregard your bank’s attempts to reach you; doing so will have harsher repercussions.