Repay Debts Without Compromising Your Needs & Expenses
No matter what stage of adulthood you’re at, it’s hard to say that we’ve got the hang of it confidently. Sometimes, we could all use some help, especially where money is concerned.
Debts, in particular, tend to make up a large part of our financial obligations and, more often than not, our constant headaches.
To remind Singaporeans that most of us are in the same boat, we’ve come up with a list of five of the most common debts working adults here incur.
Of course, we won’t leave you stranded in the middle of the ocean – there’ll be tips on how to solve those debts too, so read on to find out.
1. Personal bank loans
The age of cashless payment has made purchasing anything we need easier, with a tap or swipe of a credit card or by keying in details on an online platform.
But all the credit cards in the world may not help cover large purchases or emergency ones, where you’d need a significant amount ASAP. In such cases, most people would turn to banks for personal loans.
The good thing about such loans is that you’ll get the lump sum you need in cash directly transferred to your bank account.
So whatever you urgently need the money for, be it an emergency medical procedure or overseas trip, the bank has your back.
Since the monthly repayment rate is fixed, you won’t have to worry about calculating how much to pay each time. Interest rates tend to be lower too, which makes you wonder what could go wrong.
Well, bearing in mind that you’re borrowing a large sum of money from the bank, you’d have to pay back that same amount along with interest. And if you’re unable to do so, you’ll end up racking up debts that would only make you regret seeking a loan in the first place.
2. Credit card loans
Those whose eyes would widen at the sight of excessive monetary amounts may opt for the more conventional credit card loans instead.
Rather than owing the bank a lump sum, you’ll only have to meet a minimum payment each month, as well as interest and any other extra fees.
The problem starts when you’re unable to pay your balance, for which the bank would charge interest. The interest gets higher the less you pay, and will accumulate over time.
Once you’re unable to play catch-up and cover the mounting costs, you could very well find yourself owing the bank way more than what was initially charged on your card.
3. Education loans
While trying to make it in the world requires a good mix of finesse and intelligence, the verdict is still out on whether higher education qualifications are necessary.
For people who find value in it, they may not hesitate to take out education loans to fund their diploma or degree studies.
Whether they do that via the CPF Education Scheme or MOE Tuition Loan, they’ll have to pay back the amount once they start earning an income after graduation.
Should they be able to land high-paying jobs thanks to their degrees, the process would usually be a largely painless one, making their educational pursuits worthwhile.
But in an often uncertain and competitive world, there’s no guarantee that such an ideal situation would work out for everyone.
4. Housing loans
As much as we aspire to live a debt-free life, some financial obligations are necessary, such as a housing loan.
Every Singaporean determined to live in the property of their dreams will have to figure out their way around this. Otherwise, how else can we afford a unit that costs hundreds of thousands of dollars?
Just like all other kinds of loans, there are several different types of housing loans. The most common one is the HDB Housing Loan, which is for public housing. Both HDB and private property buyers may also opt for bank loans.
And, just like all other kinds of loans, each type comes with its own set of terms and conditions. For instance, some may have higher interest rates or may require a bigger down payment.
Thus, it’s important to do your research so you don’t end up biting off more than you can chew.
5. Renovation loans
Securing a house is one hurdle, but transforming it into your dream home is another hill to climb.
From painting to hacking walls and revamping the toilets, renovation costs can set you back a pretty penny.
Source: Unsplash
Achieving that minimalist, Scandinavian look that’s all the rage now is exciting, but you must remember that all the hard work needed will eat into your bank account.
While you’re happily building arched walkways and switching dark cabinets out for lighter ones, you might unknowingly blow your renovation budget.
A renovation loan from the bank can only cover you up to a certain amount and only for specific types of projects.
Therefore, making all the changes to create your dream space may end up costing you more than you can afford.
Manage your debts wisely & reduce stress
If you can’t tell already from the examples above, being in debt can be expensive for the following reasons:
- it “borrows” from your future salary, so instead of saving what you make, your earnings go to repayments
- high-interest debts will cause you to pay more than the original cost of the item
- creditors may take legal action against you
- can leave a negative impact on your mental health
To target these problems, VIV Associates offers a Government-assisted programme called the Debt Repayment Scheme (DRS).
With the help of a Debt Restructuring Associate (DRA), debtors can come up with a repayment plan based on their disposable income or what they can afford over a maximum span of five years.
Image courtesy of VIV Associates
While you’re sorting things out during that period, the DRS protects you from creditors’ legal action, so you won’t get sued by lenders. That’s one cause of stress and anxiety off the table.
You won’t have to worry about high interest either as that will be frozen once the programme commences, allowing you to focus on growing your savings instead.
For a sense of how the DRS will help you manage your debts efficiently, you can refer to the case study below:
Image courtesy of VIV Associates
To find out more about the DRS and how it can help you, you can sign up for a free assessment on VIV Associates’ website.
You can also follow the latest updates on their Facebook page and watch how they have helped others in this YouTube video.
Dealing with loans doesn’t have to stress you out
Adulting is hard, and not to mention expensive. Unfortunately, this means that a lot of times, taking out a loan is inevitable.
The thought of being burdened with debt repayments is understandably daunting, but thankfully, we now have the option to make the process a less stressful and more manageable affair.
Knowing that there are many others who have been in the same situation as us also helps — not only will we feel like we’re not alone, we know that there is a light at the end of the tunnel.
Disclaimer: This article is not intended to be and does not constitute financial or debt-restructuring advice.
This post was brought to you in collaboration with VIV Associates.
Featured image by TheSmartLocal.
