Credit card debt is a consumer liability that arises through multiple unpaid credit card accounts. Generally, you fall into the trap of credit card debts if you own several credit card accounts with different credit limits that are not being paid on time.
However, considering the unending financial needs, it is necessary to settle your credit card debt to maintain a decent credit history. So, if you spot yourself as one of those Singaporeans, sinking in the enormous amounts of credit card debt. Here’s a thorough guide on how to settle your credit card debt and live a stress-free life.
7 Ways to Settle Your Credit Card Debt Easily
1. Pay on time and pay more than the minimum
Timely payment diminishes the risk of falling into credit card debts with high-interest rates. In Singapore, the standard of living determines your monthly budget plans, however, if you have debts to pay then you have to make wise moves with your earnings.
You need to plan your monthly budget of expenses. A well-constructed budget plan will help you identify the exact amount of debt and adjust your other expenses accordingly. And while planning the budget, you can calculate the amount you can pay every month to lessen your debts gradually.
The minimum repayment amount for most credit card plans is around 3% of the total outstanding balance or S$50 per month. A lot of you would find it convenient to pay the minimum amount of repayment as it saves you the late payment charges. But, you are still paying the high-interest rate for your credit card.
Hence, try to finalize an amount that is higher than the minimum repayment amount. It eases the burden evenly so that you can get rid of the debt without financial dreads.
2. Pay the debt with the highest interest rate first
Check if there is a debt amount that has default on the repayment period. It is crucial because this debt yields the burden of repayment especially if it has the highest interest rate. Always prioritize the highest interest rate first as this strategy targets to decrease the interest on the total credit card debt.
And by doing so, you can lower the total amount of debt, and it will take comparatively less time to pay off your credit card debt. For example, if you have a credit card loan with the highest interest rate, this should be considered your primary repayment priority.
3. Consider zero interest or balance transfer credit cards
Statistics reveal that almost 73% of Singapore residents use at least one credit card, whereas 10% use more than six credit cards. Hence, it often tends to push them to the overburden or high amount of debts. And to settle that, you must seek numerous ways as a particular strategy would not work for everyone.
It will be quite helpful to transfer your total credit card debt to another card that will allow you to pay zero interest for a certain period. The balance transfer cards can turn that thought into reality. Several financial institutes offer cards with zero percent interest for a promotional period, and you can transfer your old card debts to that new card.
Zero-interest can be the advantage of balance transfer cards, but there are some drawbacks too. These cards charge zero interest for a promotional period only, and the period can be a maximum of 12 months. It means you get a very restricted term to remit the accumulated debt on a 0% interest rate.
And if you fail to pay all of your debt within that period, you have to repay the remaining amount at a high-interest rate. So you have to be very calculative if you avail of this way to repay your debts. Besides that, you should not be using the new card for other purposes and the repayment of the old debts as it will again increase the loan amount instead of reducing it.
4. Consolidate your debt with a personal loan
Personal loan plan is often quoted to be “A loan for all other loans”, though the plan seems great to pay your Singapore debts. Well, you will be glad to know that the balance transfers are not the only option for that but a personal loan can also do that.
The advantage of the consolidation of your debt with such a loan is that you get more time to repay it with a lower interest rate. For example, HSBC, Singapore, offers the lowest interest rate of 3.8% in a 1 to 10 years loan tenure. Almost every financial institute, like banks and money lenders, provide personal loan for various financial needs.
The interest rates of these personal loans may differ from bank to bank. Any bank offers secured personal loans on a lower interest than the money lenders but takes more time to process it. A bank in Singapore takes up to 30 days to process a debt consolidation loan, whereas a moneylender will process the same within a few hours.
However, in this case, your outstanding debt has to be 12 times higher than your yearly income. Moneylenders don’t seek collateral to lend you money on the comparatively higher rates than the banks in Singapore. It is a fact that this loan will not offer you a zero interest rate for a promotional period like the balance transfer credit cards. However, you will repay the loan on a fixed yet lower interest rate.
5. Look into debt consolidation plan
To settle several credit card debts, the government has a loan scheme that allows consolidating and remittance of the obligations as a single loan. Known as the debt consolidation plan, various banks offer this plan along with some conditions. For eligibility, a Singaporean should have multiple credit card debts, and the accumulated debt amount must be 12 times more than your monthly earning.
Just because it is a government plan, it converts all of your unsecured debts into a single loan and allows you to pay that amount on a fixed and lower interest rate than the debt. Besides that, it also gives you a longer-term to repay the loan, which can be up to 10 years.
The loan providing bank will rearrange all of your unsecured debts into a one to repay it. And being a borrower, you will remit the entire amount to the bank in a more flexible yet faster way.
6. Scale your lifestyle drastically
If you want to commit on paying your debts then one more thing you need to consider is to scale back your lifestyle. Meaning, you must learn how to prioritize your spending on the things that matters. It may be a little tougher to do this if you are used to buying things you like sporadically. Check out our post on money management tips to have healthy finances.
However, the consolidated debt plan, also known as the refinancing plan, has more benefits than any other settlement plan. When you approach a new lender for the refinancing plan, they provide you a loan amounting to the total credit card debt inclusive of the applicable interest rate.
Now, you owe money only to a single lender at a new but lower rate of interest. And that induces a drastic change in your lifestyle as well as in your debt amount. You can focus on paying your debts effectively.
7. Negotiate with the financial institution
Apart from these various plans, negotiation comes as the last option regarding the settlement of the debts in singapore. Consider it when you have no other options left with. The situation to negotiate with the agency can arise if other loan providing institutions find you not eligible for any plan or your financial condition does not permit you to remit the loans any further.
Only then can you approach the agencies or institutions to negotiate the debt’s yearly or monthly repayment. You can request them to seek any flexible options to remit the debts within some extra time. You can also ask for credit counseling Singapore as a way to consolidate your debt in Singapore or facilitate easier monthly repayment.
At the end of this discussion, it’s wiser for you to approach a loan to consolidate all your credit card debt in Singapore. Among all the loan options, the debt consolidation plans come with the most flexible features, which are best for a massive accumulated debt amount.
However, the new loan type will always depend on your choice and other variable terms and conditions of those plans. One can approach the credit counselling Singapore for credit counselling to debt repayment and management.
Compare loan offers that various financial institutions like a bank, moneylender, and pawnshop use to provide. Different websites are there that can compare the best loan options.
Instant loan is the website where you can use the free online facility to compare the best loan schemes in the market and determine the plan that you can afford to repay. Always try to be calculative and fully aware of those schemes as a wrong loan offer can increase your loads of debts instead of reducing them.