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He had credit card debt of $80,000

MAS relaxes rules on unsecured loans' borrowing limits. FOO JIE YING (fjieying@sph.com.sg) speaks to individuals who have struggled with massive credit card loans

Michael, now 42, was trying to figure out how to repay his credit card debt, which had snowballed to close to $80,000.

The technician's real name is withheld to protect his identity.

On Monday, the Monetary Authority of Singapore announced that a 2013 rule on the borrowing limit for those with huge amounts of unsecured debt will be relaxed.

For Michael, whose debt at its peak was almost 18 times his monthly income, it would have meant that he would not be able to take any further unsecured loans until June 2017.

Fortunately, the father-of-two finished paying off his debts two months ago, after being on a seven-year debt management programme with Credit Counselling Singapore (CCS).

"I don't know about regrets but I know I don't want to feel that stress again. Now I can buy things without many worries. I can save up," Michael told The New Paper in a phone interview yesterday.

He said online football gambling got him into this fix. His friends first introduced him to it a decade ago and he unknowingly became addicted.

"It's online, so it's 24/7 and you can log in anytime and anywhere. It was so convenient," he said.

"At first, I started betting $50. But it got addictive and soon I started placing bets of thousands of dollars.

"Then, all I thought was that I was going to win it back. I wanted to recoup my losses.

"But you know the thing about gambling - you can never win."

When he busted the limit for one credit card, he signed up for another. He held seven credit cards in total and the bills snowballed, coupled with the interest from outstanding bills.

Most credit cards charge interest of around 24 per cent a year.

"I was struggling. Every month, I had to pay a few thousand dollars. When I got my salary, I would pay off the minimum payment for each credit card bill," said Michael, who now earns about $70,000 a year.

"I would be left with only a few hundred dollars. It was not enough and I'd withdraw from the credit cards again. It was a vicious cycle."

PRESSURE

He kept mum about his financial situation from everyone as he did not want to trouble his friends or family. The pressure got so great that he turned to alcohol for a good night's sleep.

After work, he would go to a coffee shop and finish a few bottles of beer alone. Even then, he would still be doing his sums, trying to work out a way to repay his debt.

It was only after a colleague recommended him to CCS six years ago that Michael found a solution to his problem. Both of them were talking about debts, and Michael had mentioned that he was going through a rough patch.

Based on details provided by Michael, like his salary, and debt information from the creditor banks, CCS helped to draft out a debt management programme proposal.

It was then sent out to and approved by Michael's creditors.

He finally told his wife and parents about the debt he had chalked up over the years.

"It was a moment of liberation. It felt like my burden was lifted and I could finally heave a sigh of relief," said Michael.

Although Michael was supposed to pay a little over $1,000 every month, he would sometime pay $2,000 so that he could speed up the debt repayment.

He was also disciplined in staying away from online gambling sites so he would not fall into the same trap again.

"I'm really thankful to CCS. Otherwise, I think I would have been declared bankrupt."

At first, I started betting $50. But it got addictive and soon I started placing bets of thousands of dollars. Then, all I thought was that I was going to win it back... But you know the thing about gambling - you can never win.

- Michael

Admin exec ended up with 6 credit cards

If there is one lesson Aidah, 36, has learnt, it would be how credit card bills can snowball even if one does not spend on big-ticket items.

The part-time administrative executive and her husband had to seek help from Credit Counselling Singapore (CCS) last year for a credit card debt of $70,000.

Her real name is withheld to protect her identity.

"We didn't keep track of our bills and it just kept growing unknowingly," Aidah said.

"Once you have the cards, you spend on things you don't need. That was our biggest mistake."

It all started with a simple application for a credit card about three years ago.

The family-of-four started dining out more often and bought things that they did not need.

"I thought we could make it even though we weren't using our own cash. It wasn't really luxury items that we bought but more of eating better food more often at mid-range restaurants," said Aidah.

"It got too frequent and bills started to accumulate."

Servicing their car loan, and paying for petrol and maintenance added to their expenditure.

SIZE

Aidah realised the size of her credit card debt only when she had to take no-pay leave about two years ago to care for her sickly son, who is now eight.

She has another seven-year-old son.

"Usually, most of my salary goes to the minimum payment of my bills. I realised I had accumulated too much only when I was on leave," Aidah said.

She added that the family depended on her husband's salary, which she did not disclose to TNP.

When she reached the maximum limit on one credit card, she then applied for a card from a different bank to try to pay off her debt.

Aidah ended up with six credit cards from different banks, which hounded her to pay up every day.

"I was very, very stressed. There were times when I wished I could hide my phone so I didn't have to deal with those phone calls," she said quietly.

With the snowballing debt, she added that she stopped forking out money for her parents monthly.

Aidah and her husband considered borrowing from moneylenders or even declaring themselves bankrupt. One of the banks who called her then pointed her to CCS as a way out.

It would be another six to seven years before the debt is fully repaid but Aidah and her husband are grateful for the helping hand.

"I felt relieved that some organisation can help us, rather than we sit down and try to think of solutions. Sometimes, banks don't bother to listen to your problems," she said.

"With CCS, they actually listened and gave suggestions to our problems."

For Aidah, who earns about $1,900 a month, her debt of $70,000 is 36 times her monthly income.

So even under the relaxed rules on the borrowing limit, she will not be able to borrow any money from June 1.

We didn't keep track of our bills and it just kept growing unknowingly. Once you have the cards, you spend on things you don't need. That was our biggest mistake.

- Aidah, part-time administrative executive

NEW BORROWING LIMITS

On Monday, the Monetary Authority of Singapore (MAS) announced that it will relax the borrowing limits that it introduced in 2013 and phase it in to give affected people more time to gradually reduce their debts.

MAS will phase in the borrowing limit over four years:

From June 1:

24 times the 
monthly income

From June 1, 2017:

18 times the 
monthly income

From June 1, 2019:

12 times the monthly income

In September 2013, MAS had announced that financial institutions would not be allowed to grant further unsecured credit to a borrower whose total outstanding unsecured debt exceeds 12 times his monthly income for three consecutive months.

The rule aimed to help individuals avoid accumulating excessive debt.


NEW REPAYMENT SCHEME 

A new repayment assistance scheme was also introduced on Monday to help borrowers reduce their unsecured debts over time.

Those with unsecured debt exceeding 12 times of their monthly income can pay off their debt at a lower interest rate of 5 per cent and over eight years.

Non-profit group Credit Counselling Singapore will coordinate the scheme.

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