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Unsecured Credit Limit New Changes in Singapore by MAS

Unsecured Credit Debt New Limits in Singapore: Find out Now

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

How does new unsecured credit limit affect me

How does new unsecured credit limit affect me

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?

Financial institution (FIs) are no longer allowed to granted further unsecured credit to an individual whose unsecured borrowing exceed the limits. So if an individual exceeds their limit, they will not be allowed to apply for new credit cards.
Banks in Singapore are supportive of the new move as this allows more time for borrowers to repay their debts. This allowed banks more time for compliance with the new law. Unsecured Credit provides good margins for banks as interest rates goes up to 24 per cent per annum.

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 

How can RAS help me with my unsecured credit  debt and repayments

How can RAS help me with my unsecured credit debt and repayments

Differences between payday loans vs credit card cash advances

Differences between payday loans vs credit card cash advance

Singapore – If you have been researching and comparing credit card cash advances and payday loans, you might get confused between their various offerings.

Credit card companies are stiffening up the competition as they compete amongst themselves and the different moneylenders to offer fast cash loans to people.

Getting loans is easy in Singapore with different schemes for different package offerings. Banks, licensed moneylenders and a variant of loan companies all offer a type of loan for different consumers. So let’s narrow down to the loan types of payday loans and credit card cash advances.

Let’s look at payday loans

Basically, when you are looking for personal loans in general, you might have seen different terms used interchangeably; payday loans, personal loan, cash advance, fast loan. In this article we make reference to payday loans which is part of a personal loan type.

The definition of a payday loan – A payday loan is referred to as a short-term loan that allows a person to take up a loan amount based on their salary. There’s a minimum monthly income cap depending on the moneylender rules and borrowers who have a much higher verifiable income salary would be able to borrow more money.

Payday loans (also called “payday advances” and “personal loans”) are a subset of unsecured loans, meaning there is no collaterals needed. Payday loans are granted based on your income and are tailored to the borrower’s ability to pay back in a certain timeframe. Sometimes payday loans can be paid back in multiple split payments, but are required to pay back the entire amount with the agreed interest.

Licensed moneylenders provide payday loans and the interest rates may vary accordingly. One of the greatest advantages of payday loans would be negotiable or adjustable repayment plans. This will greatly help you in terms of money management as one can better plan their finances.

Another great advance that legit moneylenders offer are simple policies on their rates. Only an interest rate is charged on your loan amount with zero hidden charges.

What about credit card cash advances?

Credit card cash advances in Singapore

Credit card cash advances in Singapore. A look into the definition and misconceptions on credit card cash advances. The things to look out for.

Credit card cash advance is based on your available credit limit on a credit card rather than your monthly income. A credit card cash advance is generally treated like a purchase made with a credit card and the repayment terms are strict.

A cash advance on a credit card may or may not offer you a better deal than a payday loan depending on your own credit ratings and whether you are credit qualified. Some credit card companies charge higher interest on cash advances as compared to payday loans offered by moneylenders.

Cash advance loans comes with your monthly credit card bills and are to be repaid accordingly. Interest is compounded daily and they require a substantial application fee when you request for a loan.

There are hidden charges on loan amounts which could be transaction fees, late payment fees, card fees, withdrawal fees, setup fees, bank service fees which the borrower might not be aware of.

To make matters even worse, many credit card companies require you to pay off any existing non-cash-advance balance (the normal purchase you make) that you might be having on your card. This means that they force you to pay up the amount with lower interest rate first, while the cash advance balance remains untouched, with the amount owed increasing and compounding interest.

Credit Card cash advance fake cheque technique

Credit Card cash advance fake cheque technique

Ever received a “credit card cheques” from credit card companies in your mailbox? Cheques offering a big lump sum to you? This is one of the biggest misconceptions faced by people. These “cheques” are treated as credit card cash advances by credit companies and it comes with all the accompanying disadvantages. People will feel it’s easy credit, but not realizing the multiple charges on such a loan.

In Singapore, credit companies cap the maximum loan amount based on their credit limits. Cash advances charge hefty interest or finance charges from day one of the loan till the day payment is made in full.

They do have their advantages, whereby the borrower can withdraw cash at the credit company’s ATM or request for loans to be transferred to the borrower’s own bank account. Some offer loan application via phone (cash-on-call) or SMS.

As a rule of thumb, hefty charges can be avoided if you pay the full amount on your credit card statement every month. Ask your card issuer to explain how interest is computed and to provide you with a case study loan amount.

Comparison and Outcome. Choose Wisely.

So what’s the best course of action for a borrower? At times, payday loans could have higher interest rates than credit card cash advances. This is due to moneylenders face higher risks of not being repaid.

However, if you have been a repeat customer with a great history of prompt repayment, licensed moneylenders would usually offer a better rate or repayment policy for you. You could also discuss with the loan officers and they will advise on  a repayment plan for you.

Payday loans offer great flexibility in terms of repayment policy and if repayment time periods are a consideration for you, you are much better of with payday loans. Payday loans also offer no hidden charges and allow lower-income people who cannot get a credit card to take up a loan.

Choose wisely based on your loan requirements and make the right choice for you. Regardless of which loan offering you are after, do your research wisely, check reviews and check out the competitors.

Should you require better advice or have any doubts on loan offerings, feel free to drop a message to us or a phone call and our friendly loan officer will service you.

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