A man holding some is notes contemplating how to manage them.

4 Effective Ways by which You can Manage Your Debts

8 min

Our society has a rare breed of debt-free people- It has become a part of our life, even!!

From the debt, many buy a car, get an education, expand the business or own the house. However, the main thing here is managing the debt. When it gets managed properly, life improves and things accomplished easily. 

Though, the case is different when the debt fails to be managed well. The progress hinders, and it becomes difficult to move forward. 

The above implies that debt maintenance is essential -all it requires some hard work and strategies.  To make it convenient for you, we are providing you with the four ways to deal with the deals. So, without any further ado, let’s get started!!

Different Ways of Managing the Debts

Get a suitable repayment schedule

You may need a higher monthly repayment amount to quickly settle the debts. But, you must consider other commitments, different secured loans and daily expenses. You don’t want to take the burden of the debt consolidation Singapore, and eventually, it becomes difficult to pay back the secured loans. 

What’s worse is that you fail in maintaining your daily life. For many years to come, this is an unsustainable lifestyle. So, it is essential that you must know the commitments and get the sustainable repayment schedule instead of trying to pay quickly.

Properly manage the monthly expenses

You must know about your commitments and major financial obligations. Here, financial and budgeting planning becomes more important. 

Ask yourself-  what debt needs more priority? Is it the pay-off of the secured home loan as you do not want the bank to take back the mortgage? After outlining the financial commitments, know how these specific expenses can be reduced.

Consider a case, when you have to pay off the car loan, wonder if you need a car. Which are the alternative transportation methods, or if you want to buy a car, can you choose a cheaper car? If you pay more on dining out, can you reduce the cost of meals by picking cheaper options or prefer to cook the meals at home?

While looking at every single expenditure, it doesn’t appear to make much difference, for example, if you prefer to make food at home or eat in a restaurant.  

It is possible only when you strategize the finances before and can find out what is more important to you and whatnot. What are the areas where you can make the sacrifice to accomplish the financial goal or be debt-free?

Management of credit cards

One of the most reliable ways to accumulate credit card bills is to get several credit cards and spend them loosely. Of course, you do not have to pay off the bills till the month-end. Even, you only need to pay the least amount. Here, things go out of control.

Always remember that if in any case, you do not pay for the credit card payments, then, you will be charged a 25% interest rate annually.  If you continue to increase your bills without paying the existing debt every month, then this payment will become more complicated and compounded. The effect is that you may not be able to manage the repayment of your credit card debt.

As the credit cards are beneficial in getting rewards and cashback, but, if you will not be able to manage the credit card bills wisely, then, it is better to have one or no credit card. Also, if you have a habit of overspending, then, it is better to be smart and budget the monthly expenses properly. That implies, compute the amount of shopping, food or more categories and set it aside and, then, strictly follow this budget.

Accordingly, you become more careful about spending extra or surpassing the budget. If the budget exceeds, then, you have to make a reduction on the other expenses. 

Find the most suitable loan

Despite the loan with low-interest rates in the different loans Singapore, it is essential to look at additional terms, such as the maximum you can obtain, late payment fees, the repayment period, and if there is any credit facility from the bank or not.

There are many moneylenders Singapore who offer loans on different interest rates. Do not forget that the longer the loan repayment period, the more the interest rate. They also offer a limit to the debt sum that you can consolidate. There are many firms that additionally give the credit card facility once (in case of sudden expenses or emergency).

Above were the different means of maintaining the debt; however, if you fail then, you must give a try to the debt consolidation loan. To get this loan, you can choose the reliable moneylender from the list of licensed money lenders in Singapore. 

What is Debt Consolidation Plan?

The Debt Consolidation Plan is the management tool that combines all the existing personal loans and credit card debts in one loan with less interest rate. This loan can then be paid off in the automatic payments on a monthly basis similar to personal instalment loan for the tenure of almost 10 years.

The Debt Consolidation plan was commenced in 2017 by the Association of Banks in Singapore (ABS). Specifically, it was designed for Permanent Residents and Singaporeans who have difficulty in managing different high-interest unsecured debts and are unable to play properly. 

This loan is meant for only the unsecured credit facilities, such as credit lines, credit cards and personal loans, etc. Though, some unsecured loans are not acceptable, like, joint accounts, education loans, and the credit abilities for the businesses. It is only advised when you have the outstanding debts that are, 12X more than the monthly salary. 

How does the Debt Consolidation Plan Work?

Let’s take Emily as an example. Her monthly salary is US$3,000, and there is currently an unpaid balance of US$40,000 among one personal loan and three credit cards from various banks.

  Outstanding balance Interest rate Minimum payment
Credit card 1 $15000 26% per annum $450
Credit card 2 $10500 25% per annum $315
Credit card 3 $8000 25.95% per annum $240
Personal Installment Loan of 24 months $6500 11.32% per annum $270

Emily can hardly meet the monthly minimum wage of $1,275, which is almost half of his monthly pay. The outstanding balance also exceeds 12 times the monthly salary.

At this rate, she only needs to pay about $9,336 in interest per year. Since the interest rate on the credit card debt increases on the outstanding balance, it will take ten years to completely clear the debt.

A debt consolidation plan can connect these unsecured loans within one loan. Typically, the moneylenders giving the Debt Consolidation plan will use Emily credit card and loan to repay the unpaid balance, payments and charges- also, when they are from other banks.

All these accounts, then, will be temporarily suspended or closed. Emily now has to pay a monthly installment loan to banks that offer the debt consolidation plan until the full clearance of the debts.

What amount can be borrowed from the Debt Consolidation Plan?

In general, the moneylenders can lend you the debt consolidation plan amount of the exact outstanding balance you have. It, also, includes the other charges of free you collected as mentioned in the account statements.

There could be some situation where the recommended debt consolidation plan amount is not enough to pay-off the outstanding balance. If the case is this, then, you will be liable for paying the outstanding amount to the financial institution you have taken from.

The initial Debt consolidation plan also offers you an extra 5% of allowance over the total amount. It will assist you in dealing with the related charges you have acquired from the time the plan is approved until the amount received. 

This 5% of allowance will be given to the financial institution directly you have taken from and cannot be transferred to the savings or current amount. If in any case, there is a sum leftover from the 5% allowance, then, that amount will be credited to you.

Who is eligible for the Debt Consolidation Plan in Singapore?

These debt consolidation plans are only for the Permanent Resident and Singaporeans. To get it:

  • You have to be a salaried employee with an earning of $30,000 to $120,000. 
  • You must also accrue interest on an unsecured credit facility with an outstanding balance of at least 12X your monthly income.
  • You can have a provision of one debt consolidation plan at one time.  
  • You can only activate 1 DCP at a time. After three months, if you get a bank with a less interest rate, you can refinance from a different participating bank. 
  • You can also refinance DCP through other banks. 
  • It is essential to perceive that once you have registered for a valid debt consolidation plan, your outstanding debt must be less than eight times the monthly salary before you can apply for a new loan or credit card. This allows you to concentrate on managing your debts.

Concluding Remarks

The debt weight can add financial, relational and emotional stress to everyone’s lives. So, it is a must to manage the debts effectively- the disciplined mindset can crush bad money habits.

Follow the tips mentioned to shun away the debts and remain debt-free. Taking the personal loan Singapore is also a beneficial deal!! 

In the end, the choice is all yours!!

Hopefully, this article has cleared your doubts and clarified everything!!

Even if now, you have some doubts, then, ask us in the comment section below.

Thanks for reading!!


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