Five Tips to Manage Debts Better
How can you manage debt better?
Debts are loans that you have borrowed from banks and financial institutions that you must pay off within a repayment period before they turn into bad debts. Typically, the longer it takes for you to repay back your debts, the more interests you will end up paying.
Avoid making mistakes that might get you into deeper debts and read on to find out the different ways you can apply to better manage and pay off all your debts.
Here are five tips you can manage debt better.
1. Prioritise loan with the highest interest rates
Loans with high interest rates like Credit Cards can build up very quickly especially if you have been missing payments or meeting only the minimum payment. If you do not make your payments on time, you will realise that all the future repayments that you have made might not even be sufficient to pay off your principal debt amount due to the rolling interests. Several banks have also started adjusting their Credit Card interest rates higher as well. If you are already handling multiple debts, it would be best to portion most of your cash on paying off the highest interest rates loans as much as possible before dealing with the smaller loans.
2. Apply for a Debt Consolidation Plan
If you are already struggling with multiple loans and your total unsecured outstanding balances have exceeded 12 times of your monthly salary, you can apply for the Debt Consolidation plan. This plan is commonly offered by banks and financial institutions and involves combining all your existing debts into one single repayment account. By doing so, it reduces risk of incurring multiple late and interest fees with different loan accounts. This plan also prevents you from missing out several loan repayment due dates and hence avoid incurring unwanted additional penalties.
3. Speak to an experienced person
If you are experiencing overwhelming debts and you do not have the means to pay them back, do not suffer in silent. Speak to a friend or family members who have experience working in the credit or banking industry who might be able to provide you insightful advices. Alternatively, Credit Counselling Singapore offers the Debt Management Programme and our experienced counsellors will be able to provide you support, guidance, and talks / workshops on improving financial knowledge, maintaining mental and emotional wellbeing.
4. Negotiate with your creditor
Explain your current situation and politely request if the bank is able to offer a more affordable instalment repayment plan. Put up an appeal request to waive off the previous months’ late and interest charges if possible. Otherwise, check if you have been making late payments due to misalignment of your salary crediting date and your payment due dates. If yes, put up a request to adjust your statement date so it does not lapse with your salary crediting date.
5. Avoid taking additional loans
A common mistake made for desperate debtors is applying for more additional cash advances or overdrafts to repay the bigger loans. Doing this might help to temporarily relief your financial burden but overtime you will soon realise that you struggle even more when you try to repay all your debts together. In addition, do not forget that cash advances and overdrafts comes with administrative fee and interest charges.
Lastly, where can I get a copy of my credit report?
To check your credit score, you can purchase a copy of your credit report from Credit Bureau Singapore.
For a detailed explanation of a credit report, you can view a sample credit report with explanatory notes here.
If you are facing increasing difficulties servicing payments to your credit cards or other unsecured credit facilities, consider attending our weekly Debt Management talks (conducted both over Zoom and in-person at our office), where you will learn more about what to do, when and how to communicate with creditors, what are the common collection actions creditors can take, what are the various debt settlement options are and what is the CCS Debt Management Programme. Click here for schedule.
After attending the talk, you can submit a request for one-to-one credit counselling. Details on the counselling session and instructions on how to arrange for an appointment will be explained during the talk.
Published 24 February 2023.