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4 Effective Ways to Escape Spiraling Debts to Prevent Being Broke

Too many financial obligations can lead you to be broke. Prevent this from happening by applying these ways to escape spiraling debts.

It is widely accepted that loans are part of an average Singaporean’s life. However, while getting a housing loan to get a home is needed, getting into too much debt might put you into bankruptcy. Therefore, this will forever change your life.

Recent Facts:

  • The Monetary Authority of Singapore (MAS) has urged Singaporeans to be more prudent to service debt obligations. The government acknowledges the high number of households with loans. In 2015, the REPAYMENT ASSISTANCE SCHEME (RAS) was introduced to help earners of less than $120,000 per annum pay outstanding debts.

Monetary Authority of Singapore | Ways to Escape Spiraling Debts

  • In September 2015, 94,950 debtors missed payments on unsecured credit for two or more months. It is a noticeable increase from 80,390 in 2014. Therefore, it is no secret that more and more Singaporeans use loans. They apply to either get by through financial gaps or purchase things they have wanted or n. However, there is an increase in debtors missing their repayments. Remember that late repayments will pull down your credit score. Therefore, future lenders will evaluate your creditworthiness. Mainly, they consider your credit score.
  • Households Debt to GDP (Gross Domestic Product) in Singapore averaged 40.70 percent of GDP from 1991 until 2015. However, it reached an all-time high of 60.80 percent of GDP in the third quarter of 2015. The increasing household debt to GDP might not show its effect as of now. However, it might hinder the economic growth potential of Singapore in the long run. That is why the Monetary Authority of Singapore (MAS) continues to have strict lending restrictions.

5 Signs you Have to Escape Spiraling Debts

Your loan application keeps getting rejected.

Both banks and money lenders have been rejecting your loan application. The lenders are usually evaluating the risk of each potential client. If they think you are a risky customer, they will deny your loan application.  Another reason they might be rejecting you is that maybe they were your past lenders. Unfortunately, you did not diligently pay your loans. Also, your credit score may be at an all-time low. It often indicates a serious financial problem.

Your Debt to Wage Ratio is higher than 80%

To compute your debt to wage ratio, you have to add up all your repayment obligations in a month. Then, compare it with your monthly salary. For example, if you earn $4000, your accumulated repayment each month is $3,500. But, then, you only have $500 to spend on your monthly necessities and everyday needs.

If your debt to ratio reaches 100% and higher, this is a sign of seeking help from credit counseling services. Examples are Credit Counseling Singapore- a non-government-link organization.

You earn a median wage, but you are unable to repay loans on time

If you consistently have late repayments or haven’t paid your loans for more than three months, you are already in spiraling severe debt. The median wage in Singapore is $3,700. You should start backtracking if you earn above it yet can’t pay your monthly dues. Afterward, recreate a budget plan.

You cannot even pay the minimum repayment amount.

You are in a debt crisis if your duties exceed your salary. If you can only repay just the minimum repayment, it is time to restructure your debt.

You have to choose between paying loans and necessities

If you find yourself deciding whether to buy food or pay your loans, you are in a debt crisis. It is fine to give up your leisure. These are watching movies and buying a new pair of shoes. However, missing basic necessities such as food, water, electricity, and phone bills is a serious dilemma.

Now that you discovered your debts are out of control.

5 Situations that can make it worse

Yes, it can still get worse. But, unfortunately, it does happen.

Getting injured abroad

If you do not have extra savings at hand, you will have a problem when you get injured abroad. The Consulate or Embassy of the Republic of Singapore in the foreign country will only help you contact your significant others back home. But they will be unable to help you financially. Therefore, it is better to have travel insurance with wide coverage if you travel abroad.

Serious house repairs

Suddenly bursting pipes, flooded toilets, and a severe power failure need major house repair. If you have limited money or savings, how will you deal with a refrigerator full of food? These items will easily rot in such a tropical heat.

 

Suddenly being laid off.

You may have heard some rumors. However, you were not prepared when your company suddenly laid you off due to budget cuts. If you have spiraling debt and suddenly lose your only source of income, you are in trouble. Know the signs if you are about to lose your job.

Credit card fraud

You have heard stories of identity thief victims, and you might never know if you are the next prey. Be careful when putting your sensitive information online. Once a hacker uses your credit card and maxes it out, you will be in deeper debt. The good thing is, with the Monetary Authority of Singapore (MAS) guidelines, your maximum liability is only $100. It would apply to you unless there were negligence on your part. Always keep your card details secured if lost. If you think someone else has been using your cards without your permission, report it to the bank immediately.

Dental problem

It is found not to be able to watch TV due to a power outage. You can live with that for some time. However, if you got a toothache, consider it an emergency since the pain might be too much to handle. Hope you will not need a root canal or any major dental costs.

What to do to escape spiraling debts?

Pay off the bad debt first.

There can be two kinds of debts. Good Debts are loans that can help you with your asset or wealth, such as a housing loan. The bad debts are the ones you have already exhausted their use. Or you have to use it to buy something which depreciates after some time, such as car loans and payday loans.

Pay the bad debts first as they possibly have the highest interest rates. Then, after paying off the bad debts, you can focus more on the good debts. Remember that it will reflect late repayments on your credit scores.

Among the bad debt, prioritize the ones with the highest interest

Pay the highest interest rate first because as long as it gets unpaid, the more interest it will accumulate. Thus, the ballooning cost will blow up in your face. Sadly, a difficult time to escape spiraling debts. 

Create a debt repayment plan

List down all your loans and start a debt repayment plan. Put in their interest rates and the repayment schedule.

Arrange the list in such a fashion. The top should be the ones you need to pay off first.

Join a support group

You will learn responsible borrowing, your rights as a borrower, and your responsibilities. If you have loans from loan sharks by chance, these groups will likely help you find ways of solving this problem. The support groups will not entirely give you money to pay all your debts. However, they will surely give emotional support as having spiraling debt can be psychologically draining.

If you already feel that you will have problems with repayments, never hide from your lenders. Instead, communicate with them. Afterward, you will be surprised that lenders are willing to adjust repayments terms for their clients.

If you need affordable personal loans from a trusted moneylender, visit Cash Mart. Proving their service beyond customer expectations, the staff behind Cash Mart consider themselves their clients’ financial partners.

Moreover, they advise on how the clients get back on financial stability. Call Cash Mart now and learn why their clients are transformed into loyal consumers.