Debts are a scary thing. They cause sleepless nights and constant angst. While being in debt may not be odd for Singaporeans, it isn’t a good thing. While some fall in debt due to overspending, others have very different reasons. You may have made an important payment using your credit card. The importance of that transaction still doesn’t change the fact that you will be charged high interest rates till you pay off that credit card bill.
You cannot afford to skip repayments. You need to have a good credit report. Avoiding your moneylender or the banks won’t help you either. Here are ways that you can successfully settle your credit card debts and live a debt-free life.
Pay Off Your Debts In Full
Singaporeans seriously misuse your credit cards. It seems you think having a credit card is equivalent to having free cash to spend. Well, the credit card companies don’t mind if you max out your cards. They will just charge you high interests and wait for you to pay your bills.
You, on the other hand, complain about the unfairness of it all and pay only the monthly minimum. The best thing to do to help yourself is to settle your debt in full. Ignore the fact that you might not have to pay a monthly fee for late repayments. The banks and credit card companies make up for that by charging you high interests. And the interests do not reduce as you owe less. The interest amount remains the same, whether you still have S$5000 to pay or S$5. If you can afford to, then pay off your debt at once, in full.
Pay The Minimum Amount
If you cannot pay the full amount at once, then make sure you pay the minimum every month. By paying the minimum amount, you get to avoid the late repayment fees that apply. While the interest rates will still be there, paying the minimum is better than accruing more debt. For most credit card companies, the minimum amount you pay monthly is 3% of the total amount, or S$50 a month. To be sure, you should inquire from your bank.
Paying the minimum amount helps in cutting down the debt bit by bit. However, it is not a long-term answer to your debt problem. If possible, avoid paying only the minimum amount. This should not become a habit. It is unhealthy financially.
Another thing you should be mindful of is using your credit card while repaying your credit card debt. This is counterintuitive. It will just compound your debt issue. Put your credit cards away. Use only cash while you repay your debt.
Get a Personal Loan
Personal loans are loans that can be used for a variety of things. You can use a personal loan to pay for your car. You can use a personal loan to pay for your house. You can use a personal loan to pay for tuition or to make house payments. You can also use a personal loan to settle your credit card debts. Personal loans, in general, are charged a lower interest than credit cards. You can get a personal loan from a licensed moneylender, the banks, or from a pawnshop.
Licensed moneylenders offer comparative interests on their personal loans. They can also give you instant cash, approving your loan application in less than two hours. You can also work out a repayment schedule that suits your needs and your ability to pay. Personal loans are unsecured loans from moneylenders. This means you don’t need collateral to get a personal loan. It also means that the amount you can borrow from a moneylender is limited by your annual income.
Pawnshops and banks require collateral. You can get a loan from a pawnshop by exchanging valuables for cash. If your valuables are worth S$3000, that is the loan amount you will get. If you fail to repay the loan, the valuables are sold.
Banks offer the lowest interest on personal loans. However, the processing fees are many and more than make up for the low interest. Also, banks are not known for their fast loan approvals.
This gives you three options to choose from. Get a personal loan and pay off your credit card debts. It will be easier for you to pay off the personal loan.
Consolidate your Credit Card Debts
You can create a debt consolidation plan for your credit card debts. For instance, you can get a debt consolidation loan. These loans are basically cash loans that you can use to clear your outstanding credit card debts. Debt consolidation loans are a cheaper alternative to personal loans. You can get debt consolidation loans from banks, and also from licensed moneylenders.
This way, the credit card debts are taken care of. You just have to focus on paying off one loan with its interest rates. It works the same way as personal loans do. Debt consolidation is a great plan for you if your total debts are 12 times more than your monthly salary.
Obtain a Zero Rate Interest Loan
This type of loan is called a balance transfer. What you do is you get a new credit card from another bank. Then you use it to pay off the debts of your old credit card. The first 6 months come with 0% interest. With this, you have some time to regroup and plan your repayment strategy. As you pay off the old debt, please do not use your new credit card. Wait till after that debt is paid.
These 5 methods of settling credit card debts are very effective. However, you need to create a good repayment plan. After you successfully clear your credit card debts, refrain from spending so much money again. Always budget your income. Account for what you spend, what you save, and set up an emergency fund. If you must make a large financial transaction, get a personal loan. You can get one from a licensed moneylender at nothing more than 4% interest per month.