With effect from 1st June 2012, licensed moneylenders (MLs) have to follow the new rules namely:
– Use of Effective Interest Rate (EIR)
– Extension of Interest rate caps to wider band of borrowers
– Abolishment of upfront feets
– Abolishment of all exceptions to unsecured credit rules
The authority new guidelines is to :
– Maintain balance between allowing MLs to serve the market and protection of vulnerable borrowers
– Strenghten protection and safeguards for borrowers
– Ensure sufficient space for MLs to operate, to allow reasonable access to credit
If you want that electronic products for your home but don’t have $10,000 to pay for it in one go. No matter: you can pay for it in instalments over four years with no interest, on your credit card – or so banks and retailers would have you believe.
What they won’t tell unless you ask, are the pitfalls of not keeping up with full monthly payments for that item, or worse, having your card cancelled before the loan is all paid up.
A check with local banks in Singapore that offer such schemes revealed that consumers do not get charged interest only when they pay the prescribed instalments in full every month.
If they default on a payment or roll over part of it, that portion of it will be charged interest the following month – at the usual rates for credit card payments.
So, if your credit card bill for the month came up to $1,000, of which $200 was part of an instalment plan, then paying just the minimum required sum of say $50 would leave the full remaining $950 liable for interest.
Unless consumers know how to ask the right questions, they may not understand what they are gietting into. With the rising incidence of credit card bad debt, the consumers has to be careful before committing to a long-term purchase.
The interest-free instalment plans are becoming popular, especially with yound working adults who have less disposable incomes.
Retailers had to be “completely transparent with customers”. But shop salesmen often neglect to inform customers about these “hidden costs”, sometimes because they have not thought about them.
Customers say they are often not told the terms and conditions of a deal when they sign up for one.
This meant that the usual contractual interest and late charges would apply to unsettled bills and if a credit card gets cancelled, the balance has to be paid up in full. Some bank even charges a penalty of $100 per item purchased on an instalment plan for early settlement, which prematurely ends the customer’s “life-cycle” with the bank.
So signing on that dotted line means promising to keep to regular monthly payments determined by averaging the price of the item over the chosen period of time.
Spordaic payments, or paying too little or too much would mean forfeiting that “0 per cent” interest.
Banks here are cagey about the number of customers who default or roll over balances on thier instalments but say that it is in line with overall credit card debt.Continue Reading...
We all know how to spend less by sacrificing. From eating out less to buying fewer clothes to cutting back on vacations, saving through sacrificing can be effective, but painful. So if you are looking for ways of saving money, why not start with money saving tips that are relatively pain free ?
With a little immagination, you’ll find plenty of ways to reduce spending without making big changes to your lifestyle. And to get you started, here are eight painless ways to save money.
1. Get healthy: As someone who has struggled to stay fit, I realised that eating healthy and staying in shape is easier said than done. But for those who are in good shape, you can save a lot of money on life insurance and individual health insurance plans. And as an added bonus, you’ll feel better and have more energy.
2. Rethink auto insurance: Every year, re-examine your auto insurance policy for savings opportunities. For example, consider raising your deductible, which lowers premiums. For older vehicles, evaluate whether you really need collision coverage, which covers damage to your car when your car hits or is hit by another vehicle or object. And make it a habit to compare auto insurance quotes annually, which can be done online in minutes.
3. Improve your credit score: Of all the painless ways to save money, improving your credit score is arguably the most important. From home loans and car loans, to credit cards and auto insurance, a good credit score can save you a small fortune. Over a lifetime, the savings can easily reach tens of thousands of dollars.
4. Invest on the cheap: Whether you are a passive investor who sticks with mutual funds or an active stock and options trader, there are easy ways to save money. For mutual fund investors, stick with funds that have low expense ratios. My rule of thumb is to keep the weighted average expense ratios. My rule of thumb is to keep the weighted average expense ratio for all mutual funds under 50 basis points (0.50 percent). As compared to funds that charge well over 1 percent in fees annually, the savings over a lifetime of investing can be substanital. And for active traders, stick with discount brokers that charge $10 per trade or less.
5. Think triple play: One of the biggest monthly expenses for some is the cost of internet service, cable and phone. The major of providers today offer discounts when you bundle all three of these services together. Called a triple play, you not only save money, but you also get the convenience of a single bill each month.
6. Go prepaid with your cell phone: While this option won’t be right for everybody, many can save a small fortune with prepaid cell phones. You can find prepaid cell phone plans that charge just $0.10 a minute. And because they are prepaid, you don’t have to commit a long-term contracts.
7. Shop online: There are several benefits to shopping online, convenience being chief among them. But shopping online can also save big money. Many retailers offer special discounts to online shoppers. And virtually every company that sells products or services online offers promo codes, discounts or coupons. Particularly if you have a big purchase planned, make sure to search the internet for deals before buying.
8. Get cash back: If you have good credit, there are a number of cash back credit cards that pay up to 5 percent on purchases. The key is to use the card for monthly bills and everyday expenses, not to charge things you don’t need. Put monthly bills that accept credit cards on automatic payment, and use the card for everyday purchases such as groceries and gas. And as an extra precaution against overspending, pay the credit card bill in full several times throughout the month. It’s easy to do online, and it prevents any surprises at the end of the month.
Author : Dough Roller
The Straits Times Thursday, December 23, 2010 (Forum)
We appreciate the feedback from Mr Fong Cheng Cheong (“Aged over 60? Sorry, no loan for you”; last Thursday).
We would like to highlight that the bank reviews a number of criteria prior to approving unsecured cash loans or credit cards.
The qualifying age for POSB Loan Assist is between 21 and 70 years old. Other criteria would include meeting the minimum income requirements, and holding Singapore citzenship or permanent resident status.
In addition, all applications are processed in accordance with our business and credit evaluation policies that determine if the loan is approved or declined.
Ooi Huey Tyng (Ms)
Senior Vice-President & Head
Unsecured Lending & Cards
Consumer Banking Group
(Singapore) DBS BankContinue Reading...
Excessive borrowing can lead to financial trouble.
Consumers need to ensure that loans taken are well within their means. Here are eight things to consider when taking out a loan.
- A need or want?Before taking a loan, ask yourself if the item or service is meant to satisfy a need or a want.If it is a “want” – not necessary and just for consumption – perhaps it would be better to save for it rather than to pay a “premium” price (that is, the interest cost of borrowing). For instance, don’t borrow to pay for a vacation or a new kitchen appliance or get a new air-conditioningTake time to consider if there is an alternative to borrowing now or borrow a smaller amount instead. Better still, don’t buy it at all if it is unnecessary.
However, if the purchase is for investment purposes, then perhaps it is okay to get a loan. This could b for renovations that add value to your home, or enhancing your future income earning ability via training and education or for business.
- Interest cost of borrowingConsumers should be aware of the type of interest rate that is stated in the loan agreement or marking material.And when considering loan options, compare like with like.Some loans use the annual percentage rate (APR), which reflects the actual interest cost of borrowing, while others refer to the simple interest rate.
The simple interest rate is calculated by applying a flat rate on the original principal amount for the entire loan tenure.
The APR is interest calculated based on the declining principal balance over the tenure of the loan.
As the borrower makes monthly repayments, the principal is reduced every month, so the interest payable on the principal also reduces each month.
Make sure you pay off the debt before the interest starts to build-up. If you miss a payment, you may be automatically bumped up to the highest annual interest rate.
- Current debt service ratioBefore taking the loan, calculate your debt service ratio. It is the percentage of your monthly income needed to service long-term liabilities.It provides a useful guide to how much of your take-home pay – that is gross pay less 20 per cent employee CPF contribution and personal income taxes – is used to pay debts.Debt payments are monthly expenses like mortgage, car loans, personal loans or even credit card debts. A healthy debt servicing ratio – debt dvided by income – should be 35 per cent or less.
To put it another way, out of very $1,000 of after-tax and CPF income, you should spend $350 or less on debt repayments.
If the consumer already has a high amount of outstanding debt to service, it is best to pay down existing debt first before incurring more.
And even if your debt service ratio is less than 35 per cent, it is prudent to consider if you have surplus funds to take on another loan repayment after paying monthly living expenses.
Make sure you know your cash inflow and outflow before taking on another loan.
- Loan tenureIt is worth considering the optimal loan tenure as it affects monthly repayments and interest paid.Generally a longer loan tenure means smaller monthly repayments but a shorter loan tenure may lead to lower interest paid.So to minimise the interest payable, a shorter loan tenure may be an option, but the repayment will be higher.
Some financial experts suggest you make the highest repayments you can manage so that you clear the debt in the shortest possible time.
When deciding on a loan tenure, consider your monthly commitments and take the appropriate loan tenure based on your monthly cash flow.
- Early payment optionsNot all loans allow customers to settle early, so read and understand the terms and conditions of the loan before signing up.An early settlement fee is usually imposed if a loan is paid off early.If you redeem your personal loan before the full term expires, an early redemption fee of 3 to 5 per cent of the outstanding amount at the time will apply.
Home loan customers are urged to look beyond interest rates and consider factors such as the lock-in period and penalty fees.
Another potential cost is the loan cancellation fee.
- Late payment feesMost loans stipulate late payment fees. These are over and above the interest charged for late payment, so go through the terms and conditions of loan agreements thoroughly to ensure you understand them clearlyPay special attention to fees incurred for late payment.So keep track of the payment dates and remember to pay before the due date. Try to have a fewer loans or credit facilities and avoid having multiple sources of credit.
In order not to incur interest and penalty fees, pay your outstanding credit in full.
- Payment flexibilityAvoid defaulting on loan repayments as it will hurt your credit history. However, a typical loan tenure is for at last 6 months, and sometimes it is hard to predict what will happen so far into the future.You might hit cash flow difficulties at some point, so it is worth looking for loans that offer some payment flexibility and provide rewards for prompt payment.For those who can’t meet their monthly payments, they approach their lender first for assistance to restructure a loan. Quick Credit will usually review such requests on a case by case basis. A responsible lender will work with its customers to provide a solution.
- Other loan terms and conditionsMake sure you understand the key fees and charges stipulated by a loan agreement. This makes you aware of what to expect when a loan is taken and reduces any surprises after it has commenced.If you are acting as a guarantor for a loan, be clear about the terms and conditions of the agreement, especially those related to your obligations as a guarantor.In the eyes of the creditor, the guarantor is the “same” as the borrower, meaning, both the borrower and the guarantor are jointly and severely liable for the loan.
This means that even if you are willing to act as a guarantor, you should also consider your own ability to make repayments in case the principal borrower fails to repay.