Major Warning Signs Your Debt Is Out Of Control

Debts are a usual part of the regular Singaporean’s life. Here are a number of ways for you to tell whether your debts are spinning out of control. For regular Singaporean, having debt is an inevitable thing in life.

Most Singaporeans at least have taken a home loan. However, when you find yourself struggling to maintain the monthly payments of your loans, then your debts may have developed into a debt crisis.

Even then you do not have to be afraid to ask for help in managing your debt. There are many financial professionals available to assist you if you find yourself in debt crisis.

Here are several warning signs that you need to watch out for and be sure to do something fast.

Having to Make a Choice Between Repaying Debt Or Basic Necessities

When you find that every month you are in a situation where you are paying debts or eating properly, you are possibly facing a debt crisis. Debt can oftentimes cause lifestyle difficulties, like having to skip on getting yourself a pair of shoes or even having to forgo on holiday.

Nonetheless, you should not struggle with the basic necessities, like transport fare and phone line bills. Since debts may compound, it’s important that you look for help once you become aware of this happening. The sooner you get your debts negotiated and restructured, the quicker you will be able to have your financial situation back on track.

Your Loan Requests Are Often Rejected

Most banks in Singapore and other moneylender institutions often look at your credit scores whenever you request a personal loan or even a credit card. Your credit rating is generally an accurate representation of the different credit facilities you have at present as well as your repayment record. For a good number of Singaporeans, it is not hard for them to get a payday loan even when they are in debt. A basic technique in dealing with offsetting debt is by paying off the loan using a cheaper loan. For instance, you could take out a personal loan that gives 6% interest to repay a credit card loan with an interest of 24%.

When you are not able to obtain a payday loan, it is often an indication of a menacing debt crisis. Use of an individual’s credit scores can be s good predictor of when they will default (unable to repay a loan.) Therefore, if you find that your loan requests are being rejected, you need to focus on having a working budget, repayments immediately, and also close your current credit facilities one by one.

Your Debt Ratio Goes Above 80%

For you to calculate your debt ratio, you first need to add up the whole amount you should repay every month for all your debts. Regarding credit cards, repay them using the minimum amount for each month (this could be 3% of the credit owed or S$50). After that, make a comparison of this amount and your income for each month. For instance, let’s say you make S$4,500 each month. Your total personal loan repayments for all debts each month come to a sum of about S$3,600. That leaves you with only S$900 each month.

This can be a rather shaky position to find yourself in. This is because a single emergency will cause you to fail to make your repayments. You need to consider taking credit counselling services for immediate assistance since the condition will probably to get worse. When your debt ratio gets to 100% and above (that’s to say you owe a lot more than you are able to pay every month), you may have to come up with a restructuring plan for your debt.

Taking credit counselling services can help you come up with an alternative method of repayments. This is because you won’t be able to manage the continuous interest payments.

You Cannot Make Installments On Time Yet You Earn Above The Median Income

In Singapore, the median income is about $3,700 each month. Keeping this amount in mind, it important to note that only about 5% of Singaporeans that hold unsecured loans experience problems in making repayments promptly.

When your monthly salary is above the median income yet you still struggle to make prompt payments, your debts might be spinning out of control. When it happens that the late payments are regular (you fail to make a few each month), or some of your debts are unpaid for about 90 days. This could be the time for you to consider that you are in a crisis.

You Cannot Afford to Pay More than the Minimum Amount

When you aren’t able to make minimum payments, then your commitments exceed your salary. Thus you have to get your debt restructured. When you realize that you are only able to make minimum payments, you still are in debt crisis. Your minimum payments may not be enough to cover interests charged for each month.

For instance, the loan interest may be S$70 for every month, but you only make a minimum payment of S$50. It is for this reason that it is advisable for you always to repay your credit card debt in full.

When you are only making minimum repayments for each month, it’s important for you to remember that the minimum will grow over time — for instance 3% of the credit card debt.

Eventually, the amount will grow to be too much for you to handle. It will make it impossible for you to repay debts, even for your whole life, by only paying the minimum amount. In such a situation, seek immediate debt counselling.

Speed Is The Solution

The sooner you get yourself a debt consolidation plan and even seek credit counselling services, the faster you will be able to get your financial health under control. With no one to negotiate for you, moneylenders may continue to charge you the normal interest rates. And this will have your debt snowballing out of control. 2-3 months can have a big impact on debt that will take some years to repay, and one that might drive you into ruin.