4 Ways to Pay Off Credit Card Debt in Singapore

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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 four most effective ways to consolidate credit card debt are:

  1. Zero Interest or Balance Transfer Credit Cards
  2. Personal Instalment Loans
  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 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 card, 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

Best 0% Interest or Balance Transfer Credit Cards for 6 months

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

Compare the zero percent interest rate with the 25.9% average interest on late credit card payments and you can save hundreds, if not thousands, of dollars each month. Say, if you take the best offer of Standard Chartered’s Funds Transfer, you’re paying a 0.9% processing fee on S$10,000 (which amounts to S$90), and you still save a lot. The catch is of course, 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.

Comparison table for personal loan for 6 months

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

2. Personal Instalment Loan

You can use an unsecured personal instalment 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

Best personal loans over 3 years (36 months)

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. For someone above this threshold, then the HSBC Personal Loan is a winner and the best choice at 3.7% flat interest rate. But if you don’t earn above this amount, then the Standard Chartered CashOne loan is the winner at 3.88% flat interest rate.

Best personal loan for 36 months

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

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 instalment loans

Save money and compare best line of credit plans

 

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 lines 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

Save money and compare best debt consolidation loans

 

S$80,000 Loan Over 36 months
Bank Name Annual Flat Interest Rate EIR (Effective Interest Rate) Processing Fees/ Annual Fees Interest Interest + Fees Monthly Repayment
HSBC 4% p.a. 7.5% p.a. $0 $9,600 $9,600 $2,488.89
SCB 4.5% p.a. 8.64% p.a $199 $10,800 $10,999 $2,522.22
UOB 4.5% p.a. 8.41% p.a. $0 $10,800 $10,800 $2,522.22
DBS 4.58% p.a. 8.65% p.a. $99 $10,992 $11,091 $2,527.56
Citi 5.67% p.a. 10.5% p.a. $0 $13,608 $13,608 $2,600.22
OCBC 6% p.a. 11.08% p.a. $0 $14,400 $14,400 $2,622.22

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

What to read next:

SCB Funds Transfer Review: Great to Pay Off Credit Card Debt
Personal Loans: A Beginner’s Guide
Four Types of Personal Loans: What You Need to Know
3 Ways to Better Manage Credit Card Debt in Singapore

 


Rohith Murthy


By Rohith Murthy
Rohith leads SingSaver, a financial comparison site aimed at helping consumers in Singapore save money and time by finding the right financial products.