Being in debt has always been associated with negative connotations, though it is also important to note that not all debts are bad or due to a serious lack of judgment. Some people take on loans to start a business, fund their education, buy a home or achieve their financial goals.

However, unforeseen circumstances such as racking up large medical bills or a failed business venture can land one in debts that often seem almost impossible to get out. Other plausible reasons for getting into debt include being scammed or having a gambling addiction.

But there is no need to feel despair because as grim as the situation seems, there is always hope. Thanks to the range of debt solutions available in Singapore.

If you find yourself struggling with repaying your debts, getting in touch with a debt consultancy is a great way to get a fresh perspective on how you can become debt-free in the best way possible.

This one-stop guide to regaining financial freedom will help you understand how you can clear your debts through tried and tested tips as well as various debt solutions available in Singapore.

Additionally, you will be able to learn more about how a debt consultancy works and how going for debt counseling can benefit you.

Keep reading to find out more!

Part 2 – Tips And Solutions To Become Debt-Free In Singapore 

2.1 Why People Go Into Debt

Top 5 Reasons Why People Go Into Debt debt counselling Singapore

Before zooming into the tips and solutions to become debt-free, it is key for you to get an idea of the common reasons why people go into debt. This will help you understand that you are not alone or even encourage you to take preventative measures to avoid landing yourself in unfavorable situations.

According to The Straits Times article, these are the top five reasons why people fall into debt problems in Singapore:

  1. Splurging

Nearly half of the debtors helped by Credit Counselling Singapore (CCS), a non-profit organization, blamed overspending for their debts.

  1. Job woes

People who have been retrenched or suffered pay cuts often find themselves struggling to make ends meet. This has been especially evident in recent years, no thanks to the Covid-19 pandemic which has resulted in countless jobs lost.

  1. Business troubles

Company owners who take up unsecured loans in a bid to keep their businesses afloat end up accumulating more debts.

  1. Medical bills

Hefty medical bills, especially when they are unanticipated, can take a toll on debtors and their families.

  1. Gambling problems

Although fewer people took part in gambling activities amid Covid-19, problem gambling is still very much a concern due to the rise in new gambling products and trends.

While these are the most common reasons for getting into debt, there is also a myriad of other causes that can result in snowballing debts for many people. Here are some of them:

  • Poor money management

Budgeting is crucial to help you manage your expenses and save for rainy days at the same time. On the other hand, having poor money management could mean overstretching yourself without even realizing it, resulting in overspending and the inability to pay your bills.

  • Falling for scams or getting cheated

More and more are falling prey to scams and getting cheated – in fact, a whopping $227.8 million was lost to the top 10 scam types in the first six months of 2022 in Singapore! Not taking steps to prevent getting scammed or keeping yourself abreast of the latest tactics used by crime syndicates can cost you a fortune.

  • Being a guarantor to a borrower

Some may choose to be a guarantor to a borrower without much thought, thinking that friends or family can be trusted. However, when these borrowers are unable to make timely monthly repayments, the burden falls on the guarantors.

Taking note of these common reasons why some people go into debt is important so you can avoid them, look for debt solutions to become debt-free depending on your unique situation, or help a loved one who is currently grappling with money problems.

2.2 Common Misconceptions About Being In Debt

Reasons aside, there are also many misconceptions surrounding debts and stereotypes about those who are in debt. Oftentimes, these are not true.

While it can be demoralizing to see people pointing fingers at you, knowing what these misconceptions and untrue stereotypes are will build your confidence in regaining financial freedom.

  • All debts are bad

As mentioned, people take on loans for different reasons such as to further their education or to fund a business. Hence, no one should be condemned for taking on debts; these debts only become bad when you are not able to repay them or if their interest rates are way too high for you to cope with. One example is credit card debts, as they point to a huge problem of spending more than you can afford.

  • I cannot enjoy life till all my debts are paid off

Sometimes, debtors feel as though they do not have the right to enjoy the finer things in life when they have debts to pay off in the background. The good news is that this is untrue! This is when monthly repayments come into play – they are designed to help you become debt-free without having to make huge sacrifices to your quality of life. Nonetheless, certain lifestyle habits will still have to change, such as dining at expensive restaurants every week to only visiting them for special occasions, to avoid overspending.

  • I need to pay off all my debts as soon as possible

Paying off all your debts as quickly as you can might only be applicable to some types of loans, like those with lower interest rates. In other scenarios, making early payments could result in penalties and hence, would be more beneficial if you were to make timely monthly repayments while still putting money aside for emergencies or other financial priorities.

If you are unsure, speaking to a debt consultant may be helpful in assisting you to come up with a feasible debt solution in your best interest.

  • I only need to pay the minimum amount for my credit card bills

Another common misconception many debtors have is they only need to pay the minimum amount on their credit card bills. Contrary to popular belief, this will not make life easier! Outstanding amounts are constantly accruing interest which will only prolong your journey to becoming debt-free.

  • Becoming bankrupt is the worst-case scenario

While most tend to search for ways to avoid bankruptcy due to social stigmas and a host of other factors like difficulty finding jobs or having strict restrictions placed on them, filing for bankruptcy could be a final lifeline for many who are in debt.

Read up on the misconceptions of being bankrupt in Singapore to help you understand why it is one of the solutions for debtors.

You may also be interested in finding out why bankruptcy is not the end of the world.

2.3 Useful Tips To Become Debt-Free

Useful tips to become debt free debt counselling Singapore

Now that the reasons why people go into debt and the misconceptions about being in debt are out of the way, the next step is to figure out how you can pay off what you owe.

There are some habit and lifestyle changes you can make to help make the repayment process a breeze before things catch up with you one day and you find yourself having trouble repaying your debts.

Take these tips into consideration:

  • Budgeting with the 50/30/20 rule

Coming up with a practical budget that you can stick to monthly is a great stepping stone – instead of wondering where your money has gone, you will essentially be telling your money where to go.

The 50/30/20 rule is a popular budgeting method in which 50% of your salary goes to necessities such as food and expenses; 30% goes to wants like shopping; 20% goes to saving or paying off your debts.

  • Setting a lower limit on your credit cards

Overusing your credit card is like spending money you do not have, resulting in large amounts of debt that you will find yourself struggling to pay off. Thus, setting a lower limit on credit cards could deter you from spending more than you can afford.

If you can, refraining from using your credit card altogether may be even more beneficial especially if you have a spending problem.

  • Trying the snowball method

Popularized by Dave Ramsey, a finance guru, the snowball method aims to help you organize your debts by balance size and pay them off while minimizing the interest you fork out over the years.

Firstly, organize all your debts by balance size and pay the minimum amount owed. Then, use any extra money to pay off the smallest debt and once that is paid off, roll the money toward paying off the next debt. Continue doing so until you have repaid all of your debts. These small wins whenever you pay off one debt will encourage you to keep going till the day you finally become debt-free!

  • Making small lifestyle changes

Lifestyle changes that seem insignificant can make a huge difference in the long run. For example, try cooking your dinner instead of eating out, going thrifting instead of shopping for new clothes, and canceling subscriptions that you do not need (Netflix and groceries or food delivery).

The money you save from these lifestyle changes can be used to pay off what you owe quickly. After all, it is never too late to enjoy these once again when you are no longer burdened with debts.

  • Creating automatic savings

Finding yourself overspending every month and not saving for tough times? Consider setting up automatic savings that will instantly deduct a stipulated amount from your paycheck monthly. This gives you the best of both worlds – convenience by taking away the need for you to manually transfer funds and savings by preventing you from spending everything.

  • Taking care of your health 

As the saying goes, “health is wealth” – a healthy body does not just enable you to live life to the fullest but will also help you to save money eventually. Unexpected medical bills can throw your plan off so try to stay as healthy as possible by doing regular exercises and consuming a balanced diet.

Explore more tried and tested tips here.

2.4 5 Ways To Repay Your Debts In Singapore

If you have tried incorporating some of these tips in hopes of getting out of debt but are still having a hard time, then it is perhaps time to explore some other debt solutions Singapore has to offer.

There are five main ways one can repay their debts:

  1. Debt Consolidation Plan 

Also known as DCP, the Debt Consolidation Plan is offered in Singapore by banks to allow debtors the chance to combine all unsecured debts owing to various financial institutions, into one single debt. This means only repaying one bank as opposed to various banks before taking up a DCP.

You may be wondering about the benefits DCP offers apart from making repayments more convenient. It is also an effective way to repay your debts as you will only be dealing with one financial institution and its interest rate, compared to a number of banks and different interest rates. You will be able to avoid a situation where you find yourself not having enough cash to repay Bank B after your monthly repayment to Bank A, for example. Additionally, DCP helps debtors plan their finances better, avoiding late repayments that will incur extra charges in return.

But all in all, the greatest incentive for taking up a DCP is its lower interest rate which can make a huge difference in how much you are paying at the end of the day. As most banks in Singapore offer attractive interest rates to stand out amongst the competition, you will be able to find one that is suitable for your situation.

  1. Debt Repayment Scheme

The Debt Repayment Scheme (DRS) is another considerable option if you feel that you have exhausted all possibilities. DRS is designed to give debtors the opportunity to repay their debts within a set timeframe at no additional interest charge levied, with the aim of helping them avoid bankruptcy. When you take up a DRS, your debts will be consolidated and you will be offered a monthly installment plan of up to 5 years. During this time, your debts stop accruing interest while your creditors will not be able to take any legal action against you.

The end goal of DRS is to achieve a win-win outcome for both debtors and creditors – you will be debt free after repaying your debts within the timeframe while your creditors get their money back in full.

However, there is a certain set of criteria to fulfill before you can take up a DRS. You cannot apply for DRS yourself; it will only be offered to you if your combined debt does not exceed $150,000 and can only be initiated when a bankruptcy application has been made against you in the High Court by yourself or your creditor. Hence, the DRS has often been likened to a final lifeline for those on the verge of bankruptcy.

  1. Debt settlement appeal

Another viable alternative to repay your debts is through a debt settlement appeal. You can self-administer an appeal to your creditors by writing a debt settlement letter in which you explain your financial situation and propose a repayment amount that you can afford. Do include relevant documents such as payslips and CPF statements to substantiate your case.

But it is important to note that this appeal may or may not be accepted by your creditor. Some may approve and only offer it to you as a temporary solution for a few months.

If you are unsure whether a debt settlement appeal is right for you and your situation, consider visiting a debt consultancy in Singapore for a second opinion.

  1. Debt Management Programme

Offered by CCS, the Debt Management Programme (DMP) helps to facilitate repayment arrangements on your behalf so that you repay credit card, credit line and personal loan debts to creditors in full. CCS will prepare a proposal and repayment schedule to help you fully repay your creditors through affordable monthly installments, a reduced interest rate, and over a reasonable period.

You may be invited to attend talks and workshops during the course of the programme to improve your financial knowledge and maintain your mental and emotional well-being.

Like the other debt solutions with criteria set in place, you will need to have unsecured debts of $10,000 or more; debts that are owing to two or more creditors; assessed to have the capacity to repay all debts within a reasonable time to be eligible for DMP.

  1. Bankruptcy 

The remaining debt solution is to file for bankruptcy. Being bankrupt allows you to negate your debts but there are other cons such as giving up your assets, credit score getting affected and having to deal with the social stigma.

Therefore, it is always recommended to source alternatives to repay your debt before filing for bankruptcy – some options such as DCP or DRS may help you to avoid bankruptcy.

It is advisable to speak to a debt consultant before filing for bankruptcy, as there may be other alternatives to help you repay your debts and get back on track.

Part 3 – Everything You Need To Know About Debt Counselling In Singapore

3.1 What A Debt Consultancy Does

What a debt consultancy does for debt counselling Singapore

Although you probably have a clearer idea of what you can do to get out of debt now, you might also be feeling overwhelmed and unsure about which path to take. This is when a debt consultancy can come in to help you!

A debt consultancy in Singapore boasts a team of professional and knowledgeable consultants who are experienced in the field of debt solutions.

These debt consultants specialize in providing advice on how one can achieve debt relief, based on their needs and situation.

They will help to develop a viable plan to pay off your debts by performing a complete analysis of your current financial situation before recommending the best solution. This includes identifying the problems, coming up with a feasible monthly budget, advising you on the lifestyle changes to make, and laying your options down for you.

A debt consultancy and its consultants have your best interest in mind – they only have one goal which is to help you become debt free so you can return to enjoying life without worries.

3.2 Reasons To Go For Debt Counselling

Although debt consultancies and debt counselling are considered a norm in today’s society, it cannot be denied that there are some people who still feel apprehensive about getting help. This could be due to fear of judgment or the lack of knowledge on how a debt consultant can truly provide aid.

If you are still considering whether or not to get in touch with a debt consultant, these reasons to take the leap of faith may just change your mind.

  • Help you to avoid going bankrupt

Filing for bankruptcy is often seen as the last resort and because of the stringent restrictions placed on bankrupts, many prefer avoiding this option. A debt consultant will be able to help you avoid bankruptcy by giving you the right advice and coming up with a plan, such as taking up a DCP or DRS, to pay off your debts.

  • Resolve your liabilities in the most appropriate way

Debt consultants have years of experience helping debtors from all walks of life; they have the expertise to resolve your liabilities in the best way to help you regain financial freedom, regardless of your background or situation. For instance, not all debtors would benefit from taking up a DCP so the debt consultant’s role is to work out the most appropriate plan and recommend alternatives.

  • Provide emotional support and unbiased advice

While most people go for debt counselling to seek a second opinion on how they can repay their debts, you will be glad to know those debt consultants can sometimes provide emotional support as well. They are trained to empathize and pass zero judgment so that debtors have a safe space to voice their concerns.

  • Help you improve your money management 

Apart from providing in-depth information about the different debt solutions you can consider, a debt consultant will be able to help you improve your money management too. They can impart their knowledge on how to budget, save and spend wisely so that these skills stay with you for life to prevent you from getting into debt again.

  • Save relationships 

Last but not least, going for debt counselling can even save the relationships with your partner, family and friends. Taking the first step to get help from a debt consultant shows your loved ones that you are putting in the effort to better yourself and make a difference.

3.3 What Happens When You Visit A Debt Consultancy

What happens when you visit a debt consultancy for debt counselling Singapore

It is understandable to feel a little uneasy about visiting a debt consultancy since you do not know what to expect. However, there is no need to fret as the entire process is uncomplicated and done in private.

Here is a step-by-step guide to what you can expect:

  1. No-obligation consultation

When you visit a debt consultancy in Singapore, you will first sit down for a no-obligation consultation with one of their competent consultants. Come clean about all your debts, finances and concerns, and bring all relevant documents that will help the consultant understand your current financial situation.

  1. Financial assessment

Following the consultation and if you do decide to work with a debt consultancy to pay off your debts, your consultant will come up with a personalized debt solution. The repayment plan is typically tailored to each individual’s circumstances and needs because not everyone has the same amount of debt or responsibilities.

  1. Assistance 

Your debt consultant will then provide you with guidance on how you can manage your creditors and refer you to external organizations where you can seek help from. Personalized advice and tips will also be offered to assist you in repaying your debts.

There is no need to worry about an invasion of privacy – all information and consultations will be kept strictly confidential and the consultants will only act in your best interests. Furthermore, you are not obligated to take up the consultants’ solutions or advice if you feel uncomfortable.

3.4 Why Choose Debt Aid?

Ready to team up with a debt consultancy in Singapore to take the first step towards a financially burden-free life? Consider Debt Aid!

Our team of debt consultants has helped thousands of debtors and reduced over $15 million worth of debt.

We provide effective and efficient debt solutions advisory without judgment while our one-to-one consultations ensure utmost privacy and in-depth discussions for the best result. Consultations are also free of charge and with no obligation.

There is always light at the end of the tunnel even if you are in debt. With the right mindset and solutions, getting out of debt is just a few steps away.

Consult Debt Aid today to find out more!