5 common debts like personal and credit card loans and how S’poreans can solve them

Pay off your debts without compromising your needs and expenses

No matter what stage of adulthood you're in, it's hard to say we've got the hang of it with confidence. Sometimes we all could use a little help, especially when it comes to money.

Debt, in particular, tends to make up a large part of our financial obligations and, more often than not, our constant headaches.

To remind Singaporeans that most of us are in this together, we've compiled a list of five of the most common debts incurred by working adults here.

Of course, we won't leave you stuck in the middle of the ocean - there will also be advice on how to solve those debts, so read on to find out.

1. Personal bank loans

The era of cashless payment has made it easier for us to buy everything we need, by tapping or swiping a credit card or entering details on an online platform.

But all the credit cards in the world may not cover large purchases or emergencies, where you need a large amount as soon as possible. In such cases, most people would turn to banks for personal loans.

The good thing about these loans is that you will get the lump sum you need in cash directly transferred to your bank account.

So no matter what you urgently need money for, be it an emergency medical procedure or a trip abroad, the bank has your back.

Since the monthly repayment rate is fixed, you won't have to worry about calculating how much to pay each time. Interest rates also tend to be lower, making you wonder what could go wrong.

Well, keeping in mind that you are borrowing a large amount of money from the bank, you will have to repay that same amount with interest. And if you are unable to do so, you will end up racking up debts that will make you regret applying for a loan in the first place.

2. Credit card loans

Those whose eyes would widen at the sight of excessive monetary amounts could instead opt for the more conventional credit card loans.

Rather than owing the bank a lump sum, you'll only have to meet a minimum payment each month, plus interest and other additional charges.

The problem starts when you are unable to pay your balance, for which the bank would charge interest. Interest increases as you pay less and will accrue over time.

Once you're unable to play catch-up and cover set-up costs, you could very well find yourself owing the bank far more than was originally charged to your card.

3. Loans for studies

While trying to make it in the world requires a good mix of finesse and intelligence, the verdict is still out on whether higher education degrees are necessary.

For people who find value in it, they may not hesitate to take out student loans to finance their degree studies.

Whether they do it through the CPF education program or the MOE tuition loan, they will have to repay the amount once they start earning an income after graduation.

If they could land high-paying jobs with their degrees, the process would usually be painless, making their studies worthwhile.

But in an often uncertain and competitive world, there is no guarantee that such an ideal situation will suit everyone.

4. Housing loans

Even though we aspire to live a debt-free life, some financial obligations are necessary, such as a home loan.

Every Singaporean determined to live in their dream property will have to find their way. Otherwise, how can we afford a unit that costs hundreds of thousands of dollars?

Like all other types of loans, there are several types of home loans. The most common is the HDB housing loan, which is intended for social housing. Buyers of HDBs and private properties can also opt for bank loans.

And, like all other types of loans, each type comes with its own terms and conditions. For example, some may have higher interest rates or require a larger down payment.

Thus, it is important to do your research so that you don't bite off more than you can chew.

5. Renovation Loans

Securing a home is one hurdle, but turning it into your dream home is another hill to climb.

From painting to hacking walls to renovating toilets, renovation costs can cost you a pretty penny.

Achieving that minimalist Scandinavian look that's all the rage now is exciting, but you have to remember that all the hard work involved will eat away at your bank account.

While you're happily building arched walkways and replacing dark cabinetry with lighter ones, you might unknowingly be blowing your renovation budget.

A renovation loan from the bank can only cover you up to a certain amount and only for certain types of projects.

Therefore, making all the changes to create your dream space may end up costing you more than you can afford.

Manage your debt wisely and reduce stress

If you can't already tell from the examples above, being in debt can be expensive for the following reasons:

• it "borrows" from your future salary, so instead of saving what you earn, your earnings go to repayments
• high-interest debt will charge you more than the original cost of the item
• creditors can take legal action against you
• can have a negative impact on your mental health

To target these issues, VIV Associates offers a government-subsidized program called Debt Repayment Scheme (DRS).

With the help of a Debt Restructuring Associate (DRA), debtors can come up with a repayment plan based on their disposable income or what they can afford over a period of up to five years.

While you sort things out during this time, the DRS protects you from lawsuits from creditors, so you won't be sued by lenders. It is a cause of stress and anxiety off the table.

You won't have to worry about high interest rates either, as they'll be frozen once the program launches, allowing you to focus on growing your savings.

To learn how the DRS will help you effectively manage your debts, you can refer to the case study below:

To learn more about DRS and how it can help you, you can sign up for a free trial at VIV Associates' website.

You can also follow the latest updates on their Facebook page and watch how they helped others in this Youtube video.

Dealing with loans doesn't have to stress you out

Adulting is difficult, and not to mention expensive. Unfortunately, this means that most of the time taking out a loan is unavoidable.

The thought of being overwhelmed with paying off debt is understandably daunting, but thankfully we now have the opportunity to make the process a less stressful and more manageable affair.

Knowing that there are many others who have been in the same situation as us also helps - not only will we feel like we are not alone, but we know there is light at the end of the tunnel .

Disclaimer: This article is not intended to be and does not constitute financial or debt restructuring advice. This post has been brought to you in collaboration with VIV Associates. Image featured by TheSmartLocal.