Managing Debt in Singapore

In our fast-paced society and growing needs, it has become a stage whereby most people would have debts. Be it a home loan, mortgage, personal loan, car loan or credit card bills. Most importantly, one should pay off one’s debt as soon as possible to avoid incurring unknown expenses. It will save you lots of hassle and money in the future.

It is important to understand that getting into debt is a major responsibility. Too much debt can easily get us into trouble. Ask yourself the following questions before making a commitment to borrowing.

6 Big Questions before Borrowing & getting into Debt.

1. Do I really need it in the first place?

Many a times we tend to buy things we do not need. Getting the latest iPhone? Getting new clothes because of an event? A growing number of people are now buying things that they don’t really need, but due to the people around them or society itself we make the purchase on the item. We love ‘the thing’, hence we need ‘the thing’. Sounds familiar?

Many of our purchases are due to our inability to resist the temptation for instant gratification. We are turning into a first buy, and then pay for it later lifestyle; without knowing whether we can earn that money in future! Be very careful of instalment plans on purchases. It’s easy to underestimate the small weekly payments as it can add up to a whole lot more. Avoid being rash in purchase decisions and check the terms and conditions of any such instalment policy.

Start simple. Assess whether the purchase decision is a need or a want. Determine whether if it’s something that you can wait. Then save up for it and make the purchase later. Buy when you need it, not when you want it.

Impatient: Today's tweens want everything fast, with 56 per cent admitting they prefer instant gratification - Dailymail.co.uk

Impatient: Today’s tweens want everything fast, with 56 per cent admitting they prefer instant gratification – Dailymail.co.uk 

2. Is there another way I can pay for my items?

Sometimes, there are subsidies and grants for items. Some of the easiest way to pay for a new item is to sell an old one. At least this reduces your purchase price of the item or even make a profit out of your sale.

Try making a bargain on your purchase items or check out online marketplaces for cheap deals and second-hand purchases. Many a times, we seldom need items that are brand new. Pre-loved items are currently in trend now as it sharply marked down from its usual price.

Stretch your dollar on your purchases. Singaporeans are embracing the second-hand market and its a fast booming economy.

Stretch Your Dollar - Second-hand Economy

Stretch Your Dollar – Second-hand Economy

3. I already have other monthly expenses. Can I still afford it?

Track your budget. Use a budget tracking app or even an excel spreadsheet to understand your financial standing. See how much you have left after your monthly expenses, borrowings and savings. Look at the amount at the end of the day and determine whether it is still advisable to buy it or to put off the purchase.

Make a budget. Always.

Make a budget. Always.

Here’s a quick video on managing your debt in Singapore.

4. How much should I borrow?

How much should I borrow

How much should I borrow

Always try to make a larger downpayment that you can afford or go with a repayment policy that is bigger and shorter within your means. Go for loan plans that can be paid off earlier than the set period so as to avoid incurring further interest on your debt.

Borrowings should always be kept within the repayment limits; too much or too little can be restricting in their own way.

5. How much do i have to pay every month?

To keep your financial status healthy, you should not fork out more than 35% of your gross income on your total debt that you have.

Balancing Your Debt Payment

Balancing Your Debt Payment – Ensure that you plan your debt repayment well against your income

6. How long will it take to pay off my loan?

Managing Your Loan Repayment Period

Managing Your Loan Repayment Period

The longer a loan period is, the more you end up paying. Ask for a comparison of loan tenures across different loan packages that loan companies offer. Look for the interest rates and cumulative interest rates as this will help you in making an informed choice to decide on a comfortable repayment period for your debt.

Ask the loan officers for a manageable repayment period within your means. Understand the different undertaking of each loan types from them too. Payday loans, personal loans, housing loan or even renovation loans are different terms that a loan officer will use. Choose one that best suits your situation.

Conclusion

The whole point here, is that we don’t think much about long-term aspects of our spending and hence make bad financial decisions that land us into debt. Always spend within your means.

Ask yourself repeatedly; Do i need this? Can I afford this? How can I pay for it?

Know your own financial ability and borrow the minimum you need. All these will allow you to have a peace of mind and be financially sound. And finally, always be prepared for life’s “What if’s”. Have emergency savings to fall back on to cover against life’s ups and downs.

References

 

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