Taking out loans in Singapore is not an odd occurrence. The standard of living in Singapore is high, and there seems to be a lot of payments to make on cars, houses, and pets, and all of these payments are mandatory because it is the law. There is also education to think about, paying for tuition and books, and accommodation, amongst others. It is no wonder that loans have to be taken out, and credit card debts seem to be escalating every year.
Because of all these loans, personal debt has become an increasingly difficult problem for Singaporeans. While it may be necessary for you to take out personal loans on your credit card for car payments or for house payments, having an outstanding debt of S$30,000 on your credit card is something to worry about. The interest on the loans can increase with every default on your part, adding up to thousands of dollars (on interest alone), and paying off your credit card debt will just keep getting harder. Also, there is a big chance that, with outstanding credit card debts, you may not be able to take out another crucial loan when you need to. As such, you need to find ways to get out of debt and fast.
Calculate Balances, Annual Fees And Interest Rates
You have decided that it is time to pay off your credit card debt, and the time to do that is now. Before you create a strategy for paying back those loans, you need to carry out a little math to know where you stand. Calculate balances and check annual fees. Check the minimum that is due and finds out the exact amount of credit card interest rates are charged on the credit cards you own, especially if your accumulated balances are in the range of four to five figures.
Pen these figures down, and you will know what your next step should be. If you have been paying annual fees on your credit card, you have found one way out of debt: ask the bank to stop your annual fees, and use the money you have saved on those fees to pay your outstanding debt.
Plan Out Your Weekly And Monthly Budget In Advance
Budgeting is imperative to get out of debt and into a healthy financial existence. It is necessary to plan out how much you spend every week and every month, and how much you are going to save. How do you plan out this savings and expenditure budget? Figure out the difference between what you need and what you want. Place your needs and wants side by side, and compare them to how much you can afford to spend. Your expenditure should never exceed your income because that would mean that you are in an unhealthy financial situation.
When making your budget, ensure to budget for what you need, and make sure you save something at the end of every week, and at the end of every month. What you save at the end of the month is what you will use to repay the loan on your credit card.
Debt Consolidation Loans Into One Single Loan
If you have a big loan that you need to pay off, you can take out a debt consolidation loan to pay it off. Debt consolidation loans are cash loans that you can take to pay off credit card debts and other personal debt, and these loans are cheaper than traditional, personal loans. You can take a debt consolidation loan from the bank, or you can go to a licensed moneylender and get a cash loan from them.
While getting loans from moneylenders is much quicker than, say, getting a loan from the bank, you need to understand that there are two types of loans you can take from money lenders: secured and unsecured loans.
Secured loans require some form of collateral, such as a house or a car, before you can be given the loan: unsecured loans require a good credit score and loan repayment history before you can be given the loan. With a secured loan, you can get any amount you want; with an unsecured loan, the amount you can borrow depends on your salary. The interest rate on loans from moneylenders is a flat 4% rate, even if you are late on your payments; the 4% will be charged to the delayed payment.
Moneylenders also charge certain fees to the loan, such as 10% of the principal loan amount, and S$60 charged to every payment you default on.
Choose Repayment Strategy
There are two repayment strategies you can choose from to settle your credit card debt: pay highest-interest cards first, or pay those cards with the lowest balance first.
- When paying the highest-interest cards, arrange the cards from those with high interest to those with low-interest rates, and start paying them off in that order.
- When paying off the debts on the cards with the lowest balance, you rank the cards from lowest balance to highest balance and pay off the cards with the lowest balance one at a time. While you are doing this, you are still paying the minimum balance on all of your cards.
Avoid Using Credit Cards
While you are trying to repay your credit card debts, avoid making any financial transactions with your credit card. Using your credit cards will simply add to your debt: so, it would be advisable to use cash to make purchases and settle bills. Also, using cash is a good way to curb your expenses: you will only buy if you absolutely need to.
Settling credit card debt in Singapore is something that a vast number of the population has to deal with because borrowing and taking out loans is necessary to be able to live comfortably in Singapore. However, when these debts skyrocket and become too much to handle, you seriously need to pay them off and fast. Make a budget, get a debt consolidation loan, avoid using credit cards… either of one of these will go a long way in helping you reduce your credit card debt in the long run.