3 Tips on How to Get Rid of Your Piling Personal Debt and Credit Card Balance

If you feel stuck in your debt journey, we present three helpful tips to get you started in tackling your personal debt.

ValueChampion Editorial Team

by ValueChampion Editorial Team on May 15, 2024

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Personal debt is a growing problem for Singapore’s consumers. With the rising cost of living, many Singaporeans are finding themselves taking on debt to finance their lifestyles.

Aggregate household debt in Singapore has grown by  5% over the past five years. Some individuals seem to be exceptionally burdened by their debt liabilities. The number of people that filed for personal bankruptcy hit an 18 year high in 2023.  Sure, having loans for your home or your car is a reasonable cost of living expense that you can’t avoid, but if you have S$20,000 to S$30,000 of credit card debt or personal loan debt, you really need to be looking for ways to become debt-free quickly. These loans can easily cost you 15-25% in interest every year, which could snowball into thousands of dollars of extra charges.

But what are the best ways to actually repay these high cost loans quickly? Our team at ValueChampion has investigated the best financing options to help guide you back to financial health and happiness.

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If You Have A Small Amount Of Debt that You Can Repay In 12 Months: Balance Transfer Loans

If you have a growing balance of unpaid credit card bills, you might want to consider getting a balance transfer loan from bank. Basically, you can transfer your credit card balance to a different bank, and get a “grace period” of 3 to 12 months to fully pay down your credit card debt. During this grace period, you wont be charged any interest. Since your card normally charges 25% interest on your balance, using a balance transfer makes repaying your balance much easier than if you kept your balance on your card.

However, you should only use this product if you are confident that you can fully pay down your card bill within 3 to 12 months. Once your grace period expires, you will continue to be charged the high 25% interest, rendering the value of balance transfer to be useless. If you have much more than what you are able to repay in 12 months, you might want to consider a different option below.

Compare The Best Credit Cards in SingaporeFind Out More

If You Have A Small Amount of Debt That You Need To Repay Over A Few Years: Personal Loans

One of the best way to consolidate your various loans into an easily manageable debt package was getting a personal loan. These loans offer a fixed flat interest rate on relatively small loans (i.e. a few thousand dollars to hundred thousand dollars) with fixed monthly payment schedule. The best part of these loans is that you can use the funding for basically anything, unlike home loans or car loans that need to be used for specific purpose. Therefore, you could get a personal loan to pay off your credit card debt or money lenders, and slowly return to financial health over time.

Learn More About Personal Loans in SingaporeFind Out More

If You Have A Lot of Debt That You Need To Repay Over A Few Years: Debt Consolidation Loans

In 2017, banks introduced a new way of paying off your expensive debt with a cheaper loan. It’s called a “debt consolidation loan.” Effectively, it works exactly like a personal loan, except that it must be used to specifically pay off your unsecured debt, ie. credit card debt and other personal debt (line of credit, etc.). Because banks know what you are using the loan for, these loans are slightly cheaper than a traditional personal loan.

The one caveat to debt consolidation loans is that only borrowers with unsecured debt that is greater than their annual income qualify for a debt consolidation loan. For that reason, it works best for someone who has a lot of debt and needs years to fully pay if off. Of course, it’s generally a good idea to repay your loan as quickly as possible to avoid paying too much in interest, but spreading out your repayment schedule overtime can help ease the short-term pain of overstraining your monthly budget.

Learn More About Debt Consolidation PlansFind Out More

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Plan Out Your Weekly and Monthly Budget In Advance

When you are trying to get rid of your expensive borrowings and return to financial health, it’s imperative that you plan out in advance exactly how much you are going to spend and save each week and month. The first step to achieving financial health is knowing what you need and what you want, and comparing it to how much you can afford.

The most important principle to uphold is that your expenditures should not exceed your income. You cannot continue to borrow money to finance your consumption; if you continue doing this without earning more money or repaying your debt, it could financially ruin you.

Borrowing money to spend today means less money for you to use in the future. Unless you are extremely certain that your income will grow dramatically in the near term, you should be spending less than what you make.

Therefore, it’s definitely worthwhile for you to plan how much you are going to save and set aside to use for repaying your loans each month. Doing so will make it easier to track your spending on a daily or weekly basis to make sure you are on target to spend and save according to your plan. Your income generally won’t change too much too often, so making an effort to control your expenditures is one of the smartest ways of returning to financial happiness.

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