Unsecured loans like credit card debts or loans from licensed moneylenders have very high interest rates since they’re not backed by collateral.
Check out reviews on licensed money lenders and get the most affordable personal loans as well as best customer service. To protect debtors, the following security measures have been put in place to avoid over-borrowing and prevent bankruptcy:
1) Borrowing in excess for three consecutive months
When you max out your card limit for three consecutive months, it raises a red flag to the creditor about your spending habits. To discourage overspending, debt accumulation, and reliance on an unsecured credit line, the following changes will be imposed on your credit account:
- You won’t be able to request an increase in your credit limit.
- You can’t apply for a new credit card or any other unsecured debt facility.
Currently, the borrowing limit is at 18 times the monthly income of debtors. By 1 June 2019, this will be reduced to 12 times only, as per government suggestion.
2) Debt remains unpaid for 60 days past its due date
Your credit card account will be frozen. You can’t also draw down from any of your unsecured loans in the process. It will also be impossible for you to apply for a new card or loan and ask for a credit limit increase.
These actions are made to prevent you from getting into deeper debt when you can’t even pay your current one.
3) Paying only the minimum for a long time
If you keep on paying only the minimum amount, your debt will rapidly accumulate. This will alert the bank and will send you a notice containing the following information:
- The total amount with interest rate and the time it will take for you to clear your debts when you only pay the minimum each month.
- The accumulated debt you’ll have after six months if you fail to repay any of it at all during that period.
When you’re having trouble repaying your credit account, consider a Debt Consolidation Plan (DCP) or similar schemes which can help you readjust the terms to make the repayment plan much easier for you to handle.
Before your application for a new credit card is approved, creditors will usually conduct a credit check to assess your creditworthiness and spending habits. The same goes for asking a limit increase on your existing credit account. Banks will also conduct a credit check if they start to have doubts about your ability to repay loans on the agreed terms.
Credit reports will usually contain the outstanding balance on all your credit accounts, regardless of what bank they’re in, details on late payments, and any info regarding defaults and bankruptcies.
Improving Your Debt Management Skills
If you’re having trouble handling your debt situation, try the following tips on debt management:
- Regularly get your credit report to have a general idea on all the debts you have.
- Negotiate with your creditor if you can move the outstanding balance on your loans and credit cards into a debt repayment plan.
- Before you get another loan to pay off an existing one, take a good look at their interest rates and fees first.
- Use your credit cards sparingly. Avoid getting a loan too often.
- Settle debts with the highest interest rates first.
- Get into a debt program if debts amount to more than 12 times your regular income.
If you need further guidance on how to handle your debts, contact the office of the Credit Counselling Singapore (CCS) and see if you can fit in any of their debt programs. When talking about debt management, the golden rule is to not take a loan beyond what you can pay.