It is widely accepted that loans are part of an average Singaporean’s life. While it is needed to have a housing loan to get a home, getting into too much debt might put you into bankruptcy, and this will forever change your life.
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- Monetary Authority of Singapore (MAS) has kept on urging 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) has been introduced to help earners of less than S$120,000 per annum in paying outstanding debts.
- In September 2015, 94,950 debtors missed payments on unsecured credit for two or more months, from 80,390 in 2014.
It is no secret that more and more Singaporeans uses loans to either get by though financial gaps or to purchase things they have wanted or needed however there is an increase with debtors missing their repayments. Remember that late repayments will pull down your credit score. Future lenders will evaluate your creditworthiness mostly considering your credit score.
- Households Debt to GDP (Gross Domestic Product) in Singapore averaged 40.70 percent of GDP from 1991 until 2015, reaching 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, this is why the Monetary Authority of Singapore (MAS) continues to have a strict lending restrictions.
5 Signs you Have Spiraling Debt
- 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 and if they think you are a risky customer then they will deny your loan application. Another reason they might be rejecting you as that maybe they were your past lenders and you did not diligently paid your loans. You credit score may also be at all time low, this often indicates a serious financial problem.
- Your Debt to Wage Ratio is higher than 80%
To compute for tour debt to wage ratio, you have to add up all your repayment obligations in a month and then compare it with your monthly salary. If you are earning S$4000 and your accumulated repayment each month is S$3,500. Then you only have S$500 to spend for your monthly necessities and everyday needs.
If your debt to ratio reached 100% and higher, then this is a sign to seek help from a credit counselling services such as Credit Counseling Singapore- a non-government-link organization.
- You earn median wage, but you are unable to repay loans on time
If you consistently have late repayments or you haven’t paid your loans for more than three months, then you are already in serious spiraling debt. The median wage in Singapore is S$3,700 and if you are earning above it yet you can pay you monthly dues, you should start backtracking and recreate a budget plan.
- You cannot even pay the minimum repayment amount
You are in debt crisis if your duties exceed your salary. If you can only repay just the minimum repayment then it is time to restructure your debt.
- You have to choose between paying loans and necessities
If you catch yourself deciding whether to buy food or pay your loans, then you are in debt crisis. It is fine to give up your leisure such as watching movies and buying a new pair of shoes, however missing basic necessities such as food, water bills, electricity and phone bills is a serious dilemma.
Now that you discovered your debts are out of control, here are 5 situations that can make it worse. Yes it can still get worse.
- Getting injured abroad
If you do not have extra saving at hand, then you will have a problem when you get injured abroad. The Consulate or Embassy of the Republic Singapore in the foreign country will only help you contact your significant others back home but will be unable to help you financially. If you travel abroad it is better to have a travel insurance with wide coverage.
- Serious house repairs
Suddenly bursting pipes, flooded toilets, and a serious power failure needs major house repair and if you have limited money or savings then how will you deal with a refrigerator full of food that 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 you suddenly lose your only source of income then you are in need 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 max it out, then you will be in deeper debt. The good thing is with the Monetary Authority of Singapore (MAS) guidelines, your maximum liability is only S$100, unless it was proven there has been negligence on your part. Always keep your card details secured and if lost, or you think someone else has been using your cards without your permission, report it to the bank immediately.
- Dental problem
It is find not to be able to watch TV due to power outage, you can live with that for some time, however if you got a toothache, then consider it as 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 when you have piled debts?
- Pay off the bad debt first
There can be two kinds of debts. The Good Debts are loans which can help you with your asset or wealth such as a housing loan. The bad debts are the ones you have already exhausted its use or you have use it to buy something which depreciates after a period of time such as car loans and payday loans.
Pay the bad debts first as they possibly have the highest interest rates too. After paying of the bad debts, they you can focus more on the good debts. Remember that late repayments will be reflected on your credit scores.
- Among the bad debt, prioritize the ones with highest interest
Pay the highest interest rate first, because as long as it gets unpaid the more interest it will accumulate and its ballooning cost will blow up on your face.
- 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 fashion that top should be the ones you need to payoff first.
- Join a support group
You will learn responsible borrowing, your rights as a borrower and your responsibilities. If by chance you have loans from loan sharks, these groups will likely help you to find ways in solving this problem. The support groups will not entirely give you money to pay all your debts, but 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. Communicate with them and you will be surprise that there are lenders willing to adjust repayments terms for their clients.
If you need affordable personal loans from a trusted moneylender, visit Cash Mart. Proving their service as beyond customer’s expectations, the staff behind Cash Mart consider themselves as their clients’ financial partner. They also give advice on how the clients get back on financial stability. Call Cash Mart now and learn how why their clients are transformed into loyal consumers.
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