John is what you would call a person that lives in the moment.
He is young, adventurous and landed his first job. It’s challenging but challenges are what he lives for.
But all work and no play makes John a dull person. After a year of non-stop work, he needs a break.
Then, he remembers the perks of being a working adult, which gives him a credit card at his disposal. You can see the excitement in his eyes when he uses it for the first time to book for a flight out to Rome. He travels to see the wonders of the world and lives the life when he goes on a shopping spree while he’s overseas.
The convenience of a credit card, allowing him to swipe and pay for everything on credit, is an absolutely wonderful sensation that John had missed out on. He feels invincible but he’s also fully aware that he’s living on borrowed time. Swipe now, pay later, as his parents said to him.
John keeps telling them that he’s in control, that he knows how much he’s spending. And why shouldn’t he indulge himself? In his eyes, a monthly salary that’s nearly $3,000 is a sizeable amount.
Sure, he might be spending just a little bit more than what he takes home for that month. No worries, he has that all sorted out, he’ll just pay the minimum balance and wait for his next salary to pay off the remainder.
Not knowing, however, that he caught the fancy of a mutual friend. He aims to please and brings her out on a fancy date. It’s just a few hundred dollars, he can afford to charge it to his credit card.
Lo and behold, the fancy date actually worked. John is pretty surprised but hey, he tells himself that expensive dinner was totally worth it. They get together and decide to go on a getaway. Nothing lavish, he says, just charge a few thousand dollars for a one-week trip to Tokyo.
After the trip, John figures that life is too short to be spent on crowded MRT trains and in fear of a train breakdown. He figures he is in good standing to get a car. Heck, it’s a great way to bring the girlfriend around and explore new places for future dates. That car loan? It’s okay, it’s just slightly above $1,000 per month, that doesn’t take out a huge hunk of his $3,000 salary.
Everything is in his control.
This was how easy it was for John to get himself into a debt situation. In six months, he owes more than $40,000 to various banks. The walls are closing in as the letters keep coming. He pays off the minimum balance, but the next one keeps coming in. Months later, he’s unable to keep up.
Simply put, John has hit rock bottom. He couldn’t possibly turn to his family for financial help, not when his parents are still servicing a mortgage and also putting his sister through university. He’s telling himself, this is probably the end of the road.
If you’ve read this far, it’s likely that you identify with the ordeal John is going through.
Earning just $3,000 per month with a snowballed debt of at least $40,000 is not as uncommon as you thought. According to a Channel Newsasia report, The Monetary Authority of Singapore estimates at least 60,000 borrowers, including John, with outstanding unsecured debts of between 6 to 12 months. These 60,000 borrowers make up 4 per cent of the total number of unsecured credit users.
On the bright side, things are not as doom and gloom as it seems to be for John, even though he’s looking at an outstanding amount on your balance that’s more than 12 x your monthly income. John’s life line comes from the banks in the form of a debt consolidation plan.
Just like John, you might have stretched yourself thin and took on multiple loans, swiped a little too much on your credit card for the month. Simply put, John’s debts are most likely from multiple financial institutions and it becomes a struggle when he has to juggle his payments across the various banks.
In John’s case, a debt consolidation plan can effectively manage the outstanding amounts under one single repayment. The POSB Debt Consolidation Plan comes to mind, not just for the ease it affords with its monthly repayment option.
The loan tenure is also equally flexible, allowing John up to 8 years to clear his outstanding balance. Instead of feeling pressured and having to face multiple reminders, John can breathe a sigh of relief. His one and only goal is to maintain his payment through POSB, and he’s given a good number of years to clear the outstanding amount.
On top of that, there is no need to worry about the high interest that he was facing with his credit card debt. Now, he manages his repayment with an interest rate from as low as 4.58% per annum (8.22% per annum effective interest rate, inclusive of processing fee). Needless to say, that is much more attractive than the 25.9% per annum interest he had to deal with before he took on a debt consolidation plan.
To John, a debt consolidation plan is a life line. The POSB Debt Consolidation Plan comes with a Visa Credit Card, allowing him a credit limit of up to 1x of his monthly salary. With this limit, John doesn’t have to worry about overspending, and this life line gives him the option to pay for his daily necessities.
Though help is at hand, the best help for John comes from within by disciplining himself to manage the situation and adjusting his budget to pay the outstanding amount.
*John might not be a real character, but the debt situation we depicted is real. As is POSB and its Debt Consolidation Plan, which is not the end, but the start of a recovery process for people like John.