With easier access to credit and the immediate gratification culture of “Buy Now, Pay Later”, many have found themselves caught in a cycle of credit card debt. Individuals are beginning to max out their credit limits and use debt to pay off debt, such as applying for a personal loan to take care of their credit card debt. Eventually, debt that initially seem manageable for payoff could rapidly snowball because of compounding interest.
Credit Bureau Singapore statistics show that the highest consumer delinquency rates for unsecured credit cards (including $500 credit limit cards) stands at 6.05% in the last quarter for people aged 40 to 44. Delinquency, also known as late credit card payment, refers to debt that is owed for 30 days or more past the due date.
A missed credit card bill payment will have the greatest and longest lasting impact. Late payments will be added to your credit report when you are 30, 60 or 90 days past the due date, and their presence will negatively affect your credit score. Also, default records will stay on your credit report for 3 years upon full or negotiated settlement with the banks or financial institutions. If the balance reflects the status as outstanding or partial payment, the information will remain indefinitely on your credit file.
If you have defaulted on your credit card payments or find yourself in the midst of mounting debt, there are steps you can take to start recovering.
A DCP is a debt refinancing program which allows customers to consolidate all their unsecured credit facilities across all financial institutions (FIs) with one participating FI. Credit card loans are included within this plan, while other loans like renovation, education, or medical loans are excluded due to their needs-based nature. All FIs who provide unsecured credit facilities are participants of this plan, and there are currently 14 participating FIs.
A person is eligible for the DCP if they are a Singapore citizen or permanent resident and meet certain income and debt requirements. Applying for a DCP is simple enough – a qualified applicant can approach any of the participating FIs to express their interest. When an individual is approved, the FI that granted the DCP will pay off the the individual’s outstanding debt up to the approved amount.
The DCP will help those who find themselves juggling several high-interest unsecured debt and have difficulty keeping track of and meeting their payments. This way, the person will only have to pay down all their remaining debt with one FI instead of the multiple FIs they had before. The repayment scheme will enable individuals to reduce their debt over time and repay their loan in automatic monthly payments for a period of up to 10 years. The FI will also issue a limited line of credit so individuals can still have the convenience of credit facilities.
Take the time to examine your options to manage your debt effectively. As your credit information will be reflected in your credit report for 3 years after the closure of the DCP, it is important to pay off your outstanding debts in a timely manner and not lapse into unnecessary credit spending.
Debtors who do not qualify for DCP and/or are clueless about living within a budget are able to obtain information on debt management from Credit Counselling Singapore (CCS). CCS is a non-government-link organisation and a registered charity which helps individuals with unsecured consumer debt problems through education and debt repayment plans.
CCS offers info talks on wealth management, credit counselling, education on financial topic, and a Debt Management Programme (DMP). Where applicable, individuals can be part of CCS’ Debt Management Programme (DMP) that allows individuals to gradually repay their unsecured debt (eg. Credit cards or overdrafts), including the principal amount and interest charges to their creditors over a reasonable period of time.
Before taking on a case, CCS needs to have a detailed understanding of an individual’s specific situation. A one on one session will be scheduled to discuss finances and help the person work out a realistic monthly living budget to address their current debt problems.
It is important to have a good sense of what we earn versus what we can spend on. If you are concerned about the impact your debt will have on your credit score, do seek professional help. The resources above will be able to help you figure out what you can do about your current debt and take the steps needed towards a brighter financial future.
Read more: Debt Can Be a Good Thing
If you have applied for a new credit facility in the last 30 days with any of CBS’ member banks, you can receive a complimentary copy of your credit report from CBS. Otherwise, you can purchase your report online to understand your credit report better.