Retire Smart: Financial Planning Made Easy by Lorna Tan & Straits Times Press

Author:Lorna Tan & Straits Times Press [Tan, Lorna & Press, Straits Times]
Language: eng
Format: epub
Publisher: Straits Times Press
Published: 2019-03-30T16:00:00+00:00

SCHEMES THAT HELP YOU MANAGE REPAYMENT

More than 13,000 people in Singapore are paying off their unsecured debts through debt repayment programmes with banks or Credit Counselling Singapore (CCS).

Of this total, 2,617 people are on the new Debt Consolidation Plan (DCP), which was rolled out by 14 financial institutions in January. CCS, which offers the Debt Management Programme (DMP), was helping about 10,750 people with its scheme as at the end of last year.

CCS general manager Tan Huey Min says the charity organisation has assisted with over 14,000 debt repayment plans under the DMP since 2004, with some already completed successfully.

Borrowers’ profile

The latest CCS statistics, covering 2014 to last year, indicate that seven in 10 people under the DMP are males. The 35-44 age band has the highest number, or 40 per cent, of debtors. Nearly two-thirds of debtors are Chinese. About 84 per cent of those under the DMP earn up to $60,000 a year, with monthly incomes averaging $3,359. The average debt size is $100,559.

A similar consolidated statistical breakdown of DCP customers from the Association of Banks (ABS) is not available. However, Maybank’s DCP customer profile showed the trend is consistent with that of CCS, in that men tend to get into debt more than women do. By occupation, the average DCP debt size ranges from $67,055 (blue collar) to $100,633 (manager). About 62 per cent of DCP clients saw monthly payments drop 40-50 per cent after going on the DCP.

The financial institutions say these debtors typically carry six or seven credit cards from various banks, and have a habit of spending on credit. This means they tend to make purchases that are beyond their means. Often, they pay only the minimum sum on their credit card bills and roll over their credit card balances from month to month. Interest is charged on these balances, as well as on any subsequent purchases they make. The outstanding debt snowballs as a result.

Reducing unsecured credit limits

The debt repayment programmes offer welcome relief to borrowers who find themselves in despair as they struggle under a mountain of debt. The DCP rollout is also timely as borrowing limits have been tightened industry-wide.

Since June 1, the limit on how much outstanding interest-bearing debt you can owe on credit cards and other unsecured loans across all financial institutions has been cut to 18 times your monthly income for three straight months. This will be reduced further to 12 times your monthly income by June 2019 – half the limit of 24 times your monthly income in 2015.

Unsecured debts are those with no collateral, such as red ink run-up on credit cards, personal loans or an overdraft. The limit applies to interest- bearing balances on personal unsecured credit facilities. Excluded are secured loans such as property and car loans, as well as unsecured loans for business, medical and education spending. With the reduced credit limit, bank customers with outstanding unsecured debt in excess of 18 times their monthly income will not be granted any new credit.

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