Singapore: Applied lots of credit card recently? Ever had friends who are debt-ridden by their credit cards? The Monetary Authority of Singapore (MAS) will phase in tighter limits on credit card debt and other unsecured credit facilities over four years to allow more time for borrowers to cut their debt.
This was a drastic change instead of the originally imposed idea (20 months ago) of implementing the limit at once this June. The new credit limit change offers a big lifeline to consumers who have overextended.
Unsecured Credit Limit in Numbers in Singapore
Unsecured credit is borrowing that is not backed by collateral. The borrowing limit limit applies only to interest bearing balances incurred on unsecured credit facilities such as credit cards and unsecured personal loans.
These unsecured credit limits are not applicable to loans for medical, educational or business purposes. Borrowers with annual income of S$120,000 or more, or people with net personal assets exceeding S$2 million will not be subjected with the new borrowing limits. Over-extended borrowers in Singapore total 84,000 who owe S$7.5 billion(source MAS).
What does Unsecured Credit Changes
With MAS recent annoucenment, the new limit caps on a person’s total amount of credit card and other unsecured debt will be slowly implemented in phases:
— June 1 2015, the unsecured debt limit will be 24 times the monthly income
— June 1 2017, the unsecured debt limit will be 18 times the monthly income
— June 1 2019, the unsecured debt limit will tightened further to 12 times the monthly income
This new time measures allow borrowers up to June 2019 to make the transition to adjust to the new credit limits. The increased time given were brought about following feedback from the public and the advice of the Association of Banks in Singapore, and Credit Counselling Singapore.
Although most unsecured borrowers in Singapore borrow within their limits, but a small portion still have significant unsecured debts.
How does new Credit Limit Affect You?
What if I Exceed my Unsecured Credit Limit of 12X
There is a help centre whereby one can seek help from the Repayment Assistance Scheme (RAS), a centralised debt repayment solution by Credit Counselling Singapore in partnership with the banking industry.
Under RAS, debt amount if is in excess of the credit limits of 12x / 18x /24x of your monthly income will be subjected to a lower interest rate of 5% per annum. This amount can be paid in a span of 8years and will certainly help to reduce debt burden. This allows highly indebted borrowers to have a assistance scheme. Borrowers who are eligible for the scheme will get letters from their financial institutions with information on their outstanding credit debt. Learn more about RAS and how it works