Contributed by Credit Bureau Singapore

When laden with debts, we tend to fall into a downward spiral and make poor decisions. Worrying about scrimping together enough to pay off outstanding balances while managing daily expenses can cause a toll, leading to a constant feeling of fear and anxiety. 

Sometimes in a desperate attempt to clear our debts, we may make poor financial decisions such as borrowing from licensed/unlicensed moneylenders just to pay off your bank loans, unintentionally sinking even deeper into debt due to the exorbitant nature of the former’s interest rates.  

If you find yourself struggling to pay off your debts, the first thing to do is to not give up! Read on to find out some easy actionable steps that you can take today to start hacking down your debt right away. 

1. Prioritise loans with the highest interest rates 

Firstly, you should review your debts and pay off loans with the highest interest first. These would typically include your credit card and personal loans, as several banks had started adjusting their credit card interest rates higher. 

This is because the high-interest rates of 15% to 28%,¹ traditionally incurred by credit card debt, may lead to a higher overall outstanding amount if you are just making minimum payouts or are late in your payments.  

2. Negotiate with your creditor 

If you are late in paying your debts, some banks and financial institutions may practice flexibility by waiving off the interest and late charges.  

However, if you have already reached the maximum waiver limit you can try to request for a more affordable instalment repayment plan. Another alternative is to stop all new charges on your credit facility and put up a special appeal to exceptionally waive off the previous months’ late and interest charges.  

To avoid making late payments in future, check if you could adjust your statement date so that it comes after your salary crediting date, making it easier for you to repay debts in a timely manner. 

3. Speak to an experienced person 

If you are experiencing overwhelming debts and do not have the means to pay them back, do not suffer in silence. You can speak to a friend or family member with experience in the credit or banking industry who can provide insightful advice.  

Alternatively, Credit Counselling Singapore (CCS) offers the Debt Management Programme for heavily indebted individuals. CCS is a non-profit organisation that acts as a third-party counsellor between you and the bank. You will be placed on a programme to help you better manage all your loans. CCS can also provide support, guidance, and talks/workshops on improving your financial knowledge and help support your mental and emotional well-being.  

4. Apply for Debt Consolidation Plan 

If you are already struggling with multiple loans and your total unsecured outstanding balance exceed 12 times your monthly salary, you can apply for the Debt Consolidation plan with your bank or financial institution.  

This will combine all your existing debts into a single repayment account and reduce the risk of incurring multiple late fees and interest fees with different loan accounts. It will be easier for you to keep track and make payments as it is to a single account, versus having to make multiple payments on different dates each month.  

5. Avoid taking additional loans 

A common mistake made by desperate debtors is to apply for additional cash advances or overdrafts to repay some loans. Doing so may help pay off the most pressing payments, but it only kicks the can down the road as these cash advances and overdrafts often come with additional administrative fees and high interest charges. 

When we are in financial distress, we often keep these issues to ourselves and try to resolve them on our own. As much as we do not wish to implicate others, the way to get out of debt is to first be upfront with the people around you. By sharing your financial woes with people who are close to you, they can help you make more rational decisions  

Lastly, a good credit reputation matter

As you gradually clear your debts, do keep in mind that a strong good repayment history will help you to build up your credit reputation in your credit report. It is important to make prompt and full payment every month to help improve your credit score. This good habit will also prevent you from paying additional unwanted fees, such as late penalty fees or interest charges. 

To check your credit score, you can purchase a copy of your credit report at https://www.creditbureau.com.sg/. You can also view a sample credit report with a detailed explanation at: https://www.creditbureau.com.sg/enhanced-consumer-credit-report.html. 

Lastly, be sure to follow and like our Facebook page @creditbureausingapore for more useful content and tips to build a good credit reputation!

¹ https://www.valuechampion.sg/average-interest-rate-credit-cards-apr  

About the contributor:
Credit Bureau (Singapore) Pte Ltd (CBS) is Singapore’s most comprehensive consumer credit bureau that has full-industry uploads from all retail banks and major financial institutions. It is a joint venture between The Association of Banks in Singapore (ABS) and Infocredit Holdings Pte Ltd. For more information about your credit score, visit www.creditbureau.com.sg