Consolidating bad debt
As the new year just crossed the first month. Maybe some of us are in a deep surprise at how much we might have spent over the past two months. While there were efforts to help Singapore residents bring down their total debt to income ratio. That was the Repayment Assistance Scheme (RAS) which was open for application till December 2015. Now fast forward to 2017, it is now already two years since the new credit card rules kicked in.
While there is literally no cap on how many credit cards or credit limit you can own – while being in a clean bill of financial health, the inverse side is when the spending takes up and you notice that what is left is mountains of debt and can be overwhelming as well. Put that into context, the new rules allow a maximum of 12 months income in debt. Which has been phased in gradually with the maximum income ceiling of debt is being dropped since 2015.
Effective 1 June 2015 – 24 times of monthly income;
Effective 1 June 2017 – 18 times of monthly income; and
Effective 1 June 2019 – 12 times of monthly income.
Source: ABS, Singapore
I was taking a glance at the what is being offered by the banks since the RAS is no longer available. And found out that there are actually some banks that do offer help to those who are bad at managing money.
Apart from the Credit Counselling Workshops conducted by the Credit Bureau Singapore, there are some locally incorporated banks that have begun to offer some form of credit restructuring program in light of the current economic situation. The loans offered has varying interest rate and tenure of up to 10 years.
From what I read, since it is widely advertised online Citibank offers a that does not affect the credit rating yet at the same time offers a 5% p.a. outstanding debt repayment scheme so if you are someone who is disciplined or learning to become discipline this could be an option.
Some of the banks offering Debt Consolidation Plans are as below:
To be eligible for the Debit Consolidation plan, you will need to have a big amount (above 12 months income) of outstanding card balance.
While it might seem useful, but at the same time, the banks are just trying ways to earn while they help you to save on high soaring interest that has increased from 24%p.a. to as high as 28% p.a.
Another not so overlooked option would be to take up balance transfers which allow for a shorter repayment term of usually 3,6 or 12 months.
That all being said, the end of the day, the real deal is still having a good understanding of what your need and wants are. And perhaps a budget list to ensure that one does not overspend a dime on the unnecessary. Also, having still be able to keep 1 month of credit limit is pretty unheard of with the RAS.
While, personal opinion, the interest rate is generally higher than the 5% from the RAS, but at the same it gives the bank a way to earn some money during the economic downturn than to end up facing debt laden credit products.
Note: This entry is for information purpose only, and does not serve as any form of financial advice. Please kindly seek advice from the credit counselling bureau or the banks if you require assistance related to financial obligations.