While Singapore ranks as one of the countries with the highest GDP per capita in the world, we are unfortunately mired in piles of debt as well.
Based on a recent report from the Credit Bureau of Singapore, latest figures showed that the number of consumers who missed two or more months of payments on unsecured credit facilities rose 10 percent (reaching 85,352) compared to the same period in 2014. This also represents a 32 percent increase since 2011.
What's more worrying is that the amounts are getting larger as well – total overdue balances rose to around $288 million, a 7 percent rise from last year and a 74 percent jump from 2011. Comparatively, our GDP per capita rose 5.9 percent in the same period.
To put things into perspective, if you were earning $4,000 per month and spending $2,000 in 2011, in 2015 you are earning $4,236 but your spending has increased to $3,480.
It's difficult to account for the huge increase in unsecured debt, but what we know is that there are dire consequences when those bills accumulate.
Firstly, only paying the minimum sum per month is going to rack up a lot of interest charges and late payment fees.
What's worse is that it will impact your credit score, which can make it difficult for you to apply for future loans or credit facilities with financial institutions here.
If you didn't know yet, the Monetary Authority of Singapore (MAS) has implemented a borrowing limit on unsecured credit facilities.
The first phase started in June 2015 and the limit will come into full force by June 2019. This will prevent financial institutions from granting further unsecured credit to a borrower who has outstanding unsecured debt across financial institutions here. The borrowing limits are as follows:
- 24 times monthly income from 1 June 2015
- 18 times monthly income from 1 June 2017
- 12 times monthly income from 1 June 2019
So perhaps you are short on cashflow due to a large furniture purchase for your new home, or getting ready for your wedding, which has made you late for your bill payments.
You really shouldn't need to suffer the rejection of a bank loan application in the future just because of 2 months of late payments, right?
1. Credit Card Balance Transfer
You probably saw information on a credit card brochure about a card's balance transfer facility, but never really used it.
A balance transfer works if you've accumulated debt on a high-interest credit card and want to pay off the balance using another card with a lower interest rate.
Using these services can help you save hundreds and thousands of dollars on interest payments.
However, do note that you are using a credit line to service a debt, so ultimately, you still need to repay the balance. There will also be processing fees levied as well.
2. Avoid Late Payments
If your late payments on your credit card bills are due more to absent-mindedness than the inability to service the payments, use GIRO to ensure you never miss your bill deadlines.
It's easy to set up and you'll never have to go through the hassle of paying individual credit card bills again.
If you've always been diligent and prompt on paying your bills, try calling the bank to negotiate for a one-time fee waiver.
If the bank sees that you've got a good credit record, it is highly likely for them to waive the late payment charges.
3. Repayment Assistance Scheme (RAS)
If your delay in credit card bill payments is due to financial difficulty, maybe it's time to seek help.
RAS is a monthly installment plan that helps the borrower pay down the amount of interest-bearing unsecured debt that comes up to more than 12 times the borrower's monthly income.
RAS is offered at a lower interest rate of 5% per annum over a fixed period of 8 years to help borrowers repay their debt at a more comfortable pace.