4 Ways to Pay Off Credit Card Debt in Singapore

If you're struggling to keep up with your credit card monthly repayments in full, you're officially in credit card debt. And you're going to need a strategy to tackle this head on before it snowballs further.

When you've racked up high-interest debts from multiple accounts or credit cards, you should quickly move to consolidate all your debt in one place. Your new debt plan should have a lower interest rate than your existing debt, making payments more manageable and/or the repayment period shorter.

The 4 most effective ways to consolidate credit card debt are:

1. Zero Interest or Balance Transfer Credit Cards
2. Personal Loan
3. Line of Credit
4. Debt Consolidation Plan

1. Zero Interest or Balance Transfer Credit Cards

This type of credit card charges no interest for a promotional period, often for 6 to 12 months, and allows you to transfer all your other credit card balances over to it. Make a disciplined plan to clear any unpaid amount by the end of the promotional period because any remaining balance after is subject to a regular credit card interest rate of 25.9%.

Many issuers charge a processing fee of around 3% - 6%, and some also charge an annual fee. Before you choose a balance transfer, you'd need to calculate if the interest you save over time will cover the cost of the fee.

Pros:

• 0% promotional interest rate
• Higher chances of eligibility as loan is on a credit card application

Cons:

• Processing fee (compare welcome offers on SingSaver where fee is waived)
• Shorter repayment periods
• High interest kicks in immediately after promotional period ends

Here's a quick comparison chart if you're looking for a short-term loan of S$10,000 for six months.

Compare the 0% interest rate on balance transfers with the 25.9% average interest on late credit card payments and you can save hundreds, if not thousands, of dollars each month. For example, if you take the best offer of Standard Chartered's Funds Transfer, you're paying a 1.5% processing fee on S$10,000 (which amounts to S$150) for a 6-month tenure, and you still save a lot. The catch, of course, is that you must pay the S$10,000 loan in full by the end of the 6 months in order not to get hit by high interest rates again.

*Rate varies depending on credit profile

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2. Personal Loan

You can use an unsecured personal loan to consolidate credit card or other types of debt. The loan may give you a lower interest rate on your debt and a fixed repayment period (12 to 84 months) to clear off your debt.

Pros:

• Fixed interest rate and monthly payment
• Fixed payment period

Cons:

• Customers with excellent credit, higher incomes or loan amounts enjoy lowest rates
• May carry processing fee

Here's how a S$20,000 loan for 3 years (36 months) looks like for someone earning below and above S$80,000 annually. The UOB Personal Loan is great choice at 3.4% p.a. flat interest rate with the lowest EIR of 6.42% p.a. If you're looking for instant loan approval and disbursement, the Standard Chartered CashOne loan would be a good option, with 3.48% p.a. interest rate, S$300 cashback for new clients and S$200 cashback for existing clients.

*Rate available on SingSaver platform, not via bank
**Rate varies depending on credit profile

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3. Line of Credit

The third type of personal loan is the line of credit, which is an overdraft facility that only charges interest when you withdraw from the account. The loan gives you a lower interest rate compared to your credit card and offers a flexible repayment period to clear off unpaid credit card debt. Treat the line of credit as a standby cash facility for emergency use, as it's available for immediate withdrawal should the need arise. 

Pros:

• Lower interest rate than a credit card
• Flexible repayment period
• Standby cash

Cons:

• Higher interest rates than personal loans

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4. Debt Consolidation Plan

The fourth type of personal loan is the debt consolidation plan, which is a government-approved scheme available with all leading banks in Singapore. If you have several open unsecured loans – such as line of credit and credit cards – and your debt is more than 12 times your monthly income, you can go for a debt consolidation plan.

Pros:

• Fixed interest rate and monthly payment
• Fixed payment period
• Long repayment period of up to 10 years

Cons:

• Other loan facilities are closed or suspended until you clear this loan

*Rate available on SingSaver platform, not via bank
**Rate varies depending on credit profile

 

Welcome Gift: Get rewarded with S$300 cashback upon loan approval. Valid till 30 June 2023. T&Cs apply.

Enjoy low-interest rates starting from 3.4% p.a. (EIR 6.5% p.a.). Valid till 30 June 2023. T&Cs apply.

For existing debt consolidation plan holders, receive 5% cashback upon approval of your Debt Consolidation Plan with HSBC. Valid till 30 June 2023. T&Cs apply.

Apply Now

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Read These Next:
Why It’s So Important To Clear Your Credit Card Debt During COVID-19
Credit Card Housekeeping: 3 Reasons To Cancel Unused Credit Cards
What Should You Do If You Can’t Pay Your Credit Card Bill?
Personal Loans, Balance Transfers and Credit Lines: The Pros and Cons Rundown
Best Personal Loans In Singapore With The Lowest Interest Rates (2021)