How to Manage Personal Debt and Keep It From Growing

Skyrocketing rates on personal loans among young people and households in Singapore have given local financial institutions and the government cause for concern. The average household debt represented 68.5% of the country’s nominal GDP as of March 2021. Driven by housing loans, pandemic spending, and other economic factors, personal and household debts are growing across the country.

Because Capital Funds Investments is a licensed moneylender in Singapore, we’ve helped numerous clients find pathways to financial recovery despite substantial personal or household debt. We constantly remind our clients that personal debt can easily and rapidly increase if you don’t have a strategy in place.

The following are some steps you can take to help ensure that debts don’t keep piling up, making it even more difficult to overcome them.

Figure Out How Much You Owe and How Much You Earn

Most people underestimate how much debt they have. For a clearer picture of your financial status, list down your debts.

Then, calculate how much income you receive each month. If you can use a spreadsheet, organizing and documenting your income sources and how much you get will give you a better idea of how much money is coming in every week and every month.

The next step is to determine how much you need to spend on fixed expenses, such as rent and mortgage payments and utilities, and variable expenses, such as food and transportation. Also, list down how much you spend on nonessentials like meals at restaurants and movie tickets. Don’t forget to factor in emergency costs, as well.

From here, you can create a weekly and monthly budget. Consider how much you spend in total, and compare that with your income.

You can then determine whether your income is enough to cover all of your expenses as well as your debt payments. If it’s not enough, you’ll likely need to reduce the amount you’ve allotted for nonessential or, if possible, look for a new source of income.

Make a debt reduction plan

You need to plan to reduce your debt as soon as possible. When you wait too long to alleviate the situation, the interest on your personal debt grows, leaving you with even bigger costs to settle.

If you have multiple debts, a debt reduction plan will help keep them from becoming overwhelming. There are many types of debt reduction plan. One, often referred to as the “avalanche method,” involves focusing on paying off the debt with the highest interest rate first. Even if this debt is not the largest you have, you reduce the compounding effect of the interest rates.

Another option, called the “debt snowball,” entails clearing smaller outstanding debts first. Being able to pay off small debts completely will boost your morale and encourage you to move on to settling bigger debts.

Consider debt consolidation

Debt consolidation allows you to transfer unsecured debt into a single repayment plan. This means you’ll only need to pay one bill every month, and you won’t have to deal with the stress of handling numerous outstanding fees at once.

If you reach out to a debt consolidation loan provider, you’ll find better interest rates as well, which immediately saves you money compared to paying off your loans one at a time. The new interest rate will replace the previous rates.

Furthermore, you get a lot more time to pay off a debt consolidation loan. You get more time on monthly installments if you need to pay in smaller increments.

Turn to a Reputable Lender

If you plan on applying for a debt consolidation loan or a personal loan, choose only a fully licensed, reputable moneylender. Avoid lenders who don’t have a good track record or reviews: they likely have interest fees that are too high and will make recovering from debt even more challenging.

Capital Funds Investments is a trusted, licensed moneylender in Singapore. We connect our clients with cash resources to help them manage their debt and support their financial wellness. Contact us to schedule a consultation or read more about our services.