You’d be surprised how many Singaporeans deal with credit card debt. Although financial experts and our government warn against this type of debt, people still fall prey to it.
Are you unable to pay your credit card debt? If you’re in this situation, you may feel hopeless and overwhelmed.
On the bright side, you’re going to get out of it sooner than you imagined if you read this article. You can take a credit card consolidation loan to reduce the total amount of interest you pay. That could easily go up to thousands.
Let 1AP Capital share our knowledge with you.
We’ll start by explaining more about credit card debt and how interest rates work. Next, we’ll take you through seven foolproof methods to fight against bad credit starting today!
What Is Credit Card Debt, & Why Is It Bad?
Credit card debt is that overdue balance you constantly see accumulating on your card.
If you can’t tackle it in one lump payment, at least pay the minimum requirement. Otherwise, your interest will add up, and your debt will snowball.
If you get into this situation, you understand why credit card debt is bad:
- It snowballs out of control quickly and without warning.
- It decreases your credit score.
- It affects your chances of securing another loan.
- It affects your life quality by increasing your stress levels.
What Is The Monthly Interest Rate On Credit Cards?
Credit cards’ usual monthly rates are 2% in Singapore, but this sum depends on your finance provider. If you want the figure per year, it’s between 18-30%, though most banks require 25%/year.
But what about all the 0% credit cards you keep hearing about?
Sure, most banks offer these types of promotions to attract clients. And you’ll indeed get a period with 0% interest – usually one year.
Or, you will only get to enjoy 0% interest when you make full repayment every month.
Once this time passes, though, your card’s interest will be escalating to 25%/year – and this is when your balance will start growing out of proportion.
How Do Credit Card Interest Rates Work?
Credit card interest rates work precisely like other interest rates:
1. They’re calculated based on your balance.
2. When you’re not reimbursing this balance for one month, your interest adds to it. That means your second months’ interest will be more significant.
For example, if your credit card has a 2% interest/month, your daily interest rate is 0.066%.
Let’s say you use your credit card to pay your $500 worth of utility bills. If you don’t reimburse this money when your balance is due, you’ll owe a $500 outstanding balance on next month’s Day 1.
On Day 2, that balance will be $500.33. On Day 3, you’ll owe $500.66. At the end of the month, you’ll owe $510.
Sums like $0.33 or even $10 are tiny, but they add up quickly because they’re so easy to ignore. It compounds very quickly. That’s why credit card debt can sneak up on you.
So consider this:
- Your debt can grow even bigger if your credit card issuer has massive late payment fees.
- Because the interest amounts look small, you’re tempted to consider the whole overdue balance as insignificant or easy to repay.
7 Ways To Get Out Of Credit Card Debt
Credit card debt can cause many problems, which is why you should try and get out of it quickly. Here’s how:
You’d be surprised how quickly you can deal with any sort of debt after learning the basics of budget planning. Use governmental resources or try credit counselling if you want quick, personalised help.
Learning how to prioritise your spending is essential to maximise your earnings. As a result, you’ll have more money to spare, and you’ll pay your debt faster.
If you need to make more money, here are some easy ways to make passive income in Singapore.
2. Debt Snowball Strategy
The debt snowball strategy means reimbursing the smallest balance loan first. Here’s how you do it:
- Arrange your debts from smallest to largest balance.
- Reimburse the minimum amount to all of these cards each month.
- The additional money you saved at step one go directly into reimbursing the smallest balance loan.
- Once this loan is paid, take the money you’d have put into its instalment and place it towards the second-smallest loan.
- Rinse and repeat until all loans are paid.
3. Debt Avalanche Method
The debt avalanche strategy means reimbursing the credit card with the highest interest rate.
- Arrange your debts from smallest to highest interest.
- Pay the minimum amount to all your cards monthly.
- The additional money saved at step one go into reimbursing the highest-interest loan.
- Once you repay this loan, take its corresponding monthly instalment and use it towards the second-highest interest loan.
- Repeat until you pay all your debt.
The debt avalanche method helps you tackle your most significant problem: accumulating interest. And no interest accumulates faster than high interest.
However, this method isn’t excellent if your highest-interest loan is enormous because you can lose motivation quickly. In this case, focus on the debt snowball strategy that builds confidence as you pay off one loan at a time.
4. Debt Consolidation
Debt consolidation has a similar purpose to the debt avalanche method: it focuses on out-of-control interest rates. If you owe money on various credit cards and have some loans, too, you know how quickly that interest can add up.
Getting another loan for your credit card loan may sound dubious, but it helps in lowering your overall interest paid. If you need a loan, you can apply for one in minutes here.
Every time you try to pay one loan, out hops another interest that makes your efforts seem useless.
Here are two solutions:
1. Debt consolidation loans. These loans unite your debts into one, so:
- You’ll lower your monthly interest.
- You’ll have just one deadline.
- You’ll get a longer, flexible tenure.
As a result, you can seamlessly integrate the corresponding monthly instalment into your budget because that payment is lower.
2. 0% balance transfer. Take advantage of 0% promotions to move your debt to another credit card. Although the transfer fees get to 3-6%, these fees are small compared to 25% interest per year. The point, though, is to repay your loan within the 0% period.
Not to worry, reliable financial institutions like 1AP Capital are here to offer low interest loans to help you.
5. Negotiate With Your Bank
Bank customers don’t usually do this, though it’s your safest bet to obtain better terms. Remember that your financial provider wants to get more money and lower its risks. They can’t meet this goal if:
- You can’t make any payments because of their stringent conditions.
- You transfer your debt onto another credit card instead of paying more interest into your current card.
As a result, you can negotiate a period of paying just the interest or a period of late payment exemption.
1. Explain why this is a win-win solution.
2. Explain the plan you have to reimburse your debt. Show precise figures based on expected earnings, diminished expenses, and so forth. If you’re into credit counselling, now’s the time to mention it.
6. Home Equity Loans
Home equity loans entail using your property as collateral to obtain a significant loan. Then, you can use this amount to repay your credit card debt.
Think of it like this:
While credit cards’ interests reach 25%/ year, the interest rates for home equity loans are 1.8%/ year.
On the other hand, you have to be sure you can repay your home equity loan if you don’t want to lose your property.
7. Credit Counseling
Credit counselling agencies like Credit Counseling Singapore will help you:
- Learn budget management techniques adapted to your particular household situation
- Learn how to repay your existing debt
- Learn how to stay out of future debt and take just good loans
- Negotiate with your lenders to achieve the best outcome
Get A Fast Cash Loan With 1AP Capital To Cover Your Credit Card Bills
Instead of allowing your credit card debt to accumulate more interest, why not try out a fixed loan plan to stop the losses?
Getting a personalised loan can help you lower the overall interest charged and save plenty of money. It will help your financial health.
1AP Capital is one of the best licensed moneylenders in Singapore with more than 130 positive Google reviews. With more than 15 types of loan products, we are always able to find a financial solution to solve our customers’ problems.
If you have any questions, feel free to us a call or make an appointment here. Or, you can drop us a visit at our shop. We are located within a 3-minute walk from Tanjong Pagar MRT! Fast and convenient!