Credit card debts can be a scary thing. For one minute you used it to pay — for compulsive shopping sprees, unexpected hospital bills or other emergencies — then the next thing you know, you are now $20,000 in debt.
If you’re feeling a dark cloud of credit card debt hovering over your head, then this article is for you.
Here’s how to clear credit card debt in the quickest possible with these 4 tips and live a debt-free life — even when it seems impossible.
Before we share them, did you know that credit card debt is a common growing problem for Singaporeans?
Credit Card Debt is a Growing Issue for Singaporeans — How is it possible?
Credit card debts cover 3.4% out of S$57,637 in the average debt of a Singaporean household.
Apart from this, the number of Singaporeans drowning themselves into credit card debt is rising very quickly.
The reason behind this is because credit card users in debt pay a minimum monthly payment that leads to unconsciously paying more interest than required.
But did you know that credit card debts can affect your credit score? Yes, it’s true.
An increase in credit card debt or late payments towards it will negatively affect your credit score. It will affect your eligibility to apply for financial products such as a loan for a car or house.
Not to mention, employers look at your credit score as part of the background check. If you have a bad credit score, this could influence your employment opportunities.
Credit Card Debt is Dangerous
If you don’t know this by now, credit cards are known to have high-interest rates, ranging from 25% to 28% per annum.
If you fail to pay your credit card outstanding balance, it can lead to an escalated debt amount.
For instance, $4,000 outstanding amount can quickly become more than $1,000 in a year if you add the 25% interest rate because you didn’t pay the full balance in each billing cycle.
That is an additional $1,000 you are shelling out because you failed to pay off your credit card.
Not to mention, credit card debts can sour and strain your lifestyle. It can affect your mental wellbeing.
Let’s not forget about its effect on your finances.
How Does a Large Amount of Debts Affect Your Daily Life?
With high debts, fulfilling your other financial goals are much more difficult.
Paying more money to clear your debt can leave you with less money for other priorities like saving for retirement or a relaxing vacation.
With the COVID-19 looming around us, it is understandable that some are going through a rough financial period.
However, this shouldn’t be an excuse not to pay your debt and deteriorate your credit score.
With that said, it is best to acknowledge that credit card debt is a problem and it’s time to tackle right now.
Here are 4 tips on how to clear credit card debt and get on the right track in your financial health.
4 Life Tips for Tackling Credit Card Debt
Many credit card companies and banks offer this kind of service known as a balance transfer.
Referred to as a short-term cash facility, it basically works by transferring your outstanding credit card debt to a 0% interest rate loan.
When you apply for it, you can consolidate all of your debts either from one or multiple credit cards into one place through a balance transfer.
In other words, it’s very similar to a personal loan, but they differ from one another. For example, balance transfer’s interest rate is at 0% whereas personal loan offers 4.5% to 7% interest rate.
A balance transfer may sound like a good offer on a table, but most banks charge a processing fee of 1% to 5% on the approved transfer amount.
In other words, this helps you to pay off your outstanding credit card amount.
Line of Credit
Another approach to pay off your debt is through the line of credit. This kind of financial product is a flexible short-term loan usually offered by banks.
This type of loan offers a lower interest rate compared to credit cards and provides a flexible repayment duration to pay them off.
However, the line of credit operates slightly different from a personal loan.
The most significant difference between a line of credit and personal loan is that with a line of credit, you can borrow the approved, withdrawn amount — let’s say $20,000 — and you can withdraw cash upon your limit as you need it.
Personal loan, on the other hand, works by getting all of the money in one lump sum from the bank. This will be further explained below in our fourth point.
Another difference to illustrate is that a line of credit offers open-ended loan tenure, varying between 18.6% p.a. and 20.9% p.a.
A personal loan has a fixed interest rate between 3.7% to 4.5% and fixed loan tenure.
Debt Consolidation Plan
This third type of approach you can apply is the debt consolidation plan. It’s a government-approved plan offered in all Singapore’s leading banks.
This approach only applies to you if you have several unsecured loans under your belts such as credit card debts and a line of credit and your debt is more than 12 times your monthly salary.
It works by combining all of your credit card debt into a single monthly payment with a fixed interest rate. You also have a set payment period up to you 10 years.
In a manner, this approach is ideal for people who have so much debt that consist of personal and credit card debt that they need to pay off over a few years.
Personal Loans from Singapore Banks
This latter approach is the most flexible way to pay off your credit card. Known as a personal loan, you can choose the loan amount and tenure that suits your needs.
It provides a lower interest rate and a fixed repayment period to clear off your debt.
However, you must apply discipline when it comes to using the money from the personal loan to settle off your credit card debt in full, rather than allowing it to add more load into your debt amount.
It is also important to pay the monthly payments on time, which is slightly higher than the minimum payment on a credit card bill.
Seek Counsel With Credit Excel Capital
If you’re overwhelmed and looking to seek help in resolving your credit card debt problem, approach Credit Excel Capital.
One of Singapore’s Top Licensed Money Lenders, we offer personal cash loan that are quick and easy to clear credit card debts.
We aim to give you the cash you need to pay off your debt. Credit Excel Capital also offer genuine advice and resources to help you on your journey to becoming debt-free.
Feel free to contact us on how to apply for a loan and get approved immediately.