Debt is a major source of stress, and it is affecting the lives of many Singaporeans.
In July 2021, the total household debt across Singapore reached US$276 billion or SG$373.84 billion. It accounted for 68.5 percent of the city-state’s Nominal GDP during the first quarter of the year, slightly higher than the 67.9 percent posted in the quarter prior.
While high, it is not as bad as the record of 92.7 percent in September 2003, but it is still worse than the record-low of 55.3 percent from March 1995.
No doubt, the pandemic played a major role. In 2020, as many as one out of four Singaporeans lost their jobs because of COVID-19. Many also had to work outside of their regular hours as the virus swept through the population, forcing the nation’s 5 million residents into lockdown.
The Debt Problem
The problem of debt is on the rise among those who are under the age of 30. Young adults’ average personal loans and overdraft balances increased by 23 percent in the first quarter of 2021 compared to the same period last year.
On average, the personal loan and overdraft balances among people between 21 and 29 were SG$49,689 during Q1 2021. Around Q1 2020, the average personal loan and overdraft balances within the age group were SG$34,941.
A borrowing limit was imposed in Singapore in 2015 to keep unsecured debt from spiraling out of control, but SG$50,000 is still a lot of money. For many, it could lead to more bad decisions that will hurt them financially.
Debt prevents people from building their wealth. It hits people who are in the low-income bracket so much more. According to experts, debt affects the poor psychologically, causing severe anxiety. It also leads them to further make harmful decisions.
People in low-income households already live from hand to mouth. Adding mounting debt into the equation when struggling to scrounge money for electricity and food is a burden.
Debt occupies the mind, zapping energy and leaving people with less capacity to stay focused on their jobs and resist temptations. That is part of the reason why people who are experiencing high levels of stress tend to indulge in comforting, often unhealthy, habits such as binging on fast food and ultra-processed food. The stress of debt impairs a person’s decision-making skills.
Being stuck in chronic debt, which is common among low-income households, keeps them in a state of poverty.
People who are in debt and from low-income households do not have access to a lot of opportunities. Because of the financial situation, they may turn down training or avoid the risks of trying innovations. They have too many problems weighing down their minds that there is no longer room for self-improvements.
Get Out of the Debt Cycle
There is a way to escape the debt cycle, especially among young people who do not belong in a low-income household. The pandemic and the restrictions created to control it have created financial challenges for the population, pushing people into debt. Prevent it from spiraling out of control.
While borrowing more money sounds counterproductive when in debt, consider taking out a debt consolidation loan in Singapore. This is ideal for those who are in debt across multiple lenders. This is how it works: you borrow a loan to pay off all your existing debt, especially those with high interest rates such as credit cards. Once done, you only have to pay one lender every month. With lower interest rates, it makes paying off debt more affordable.
It is not for everyone. Some people may not need to borrow more money to pay off existing loans. You can go the traditional method which involves reducing your expenses, especially unnecessary purchases, to have enough to pay your monthly dues. You can prioritize paying debts that have high interest rates to prevent them from incurring late fees. Once you pay off high-interest debt, you start tackling the next debt, then the next until you reach the bottom of the list.
In addition, you can negotiate with your lender to create a payment plan that you can afford to pay regularly. Most financial institutions will be willing to discuss the debt and make arrangements to accommodate the debtor’s financial situation.
Being in debt has been a normal part of life for most people, but it can go quickly out of control. For some, it may even plunge them toward poverty or cause high levels of stress. It is not easy to pay off debt, especially when it has snowballed into an amount that seems insurmountable. However, there are multiple ways one can be free from debt.