Unsecured Debt

When running into a cash flow situation, applying for a personal bank loan is one of the go-to options. Regardless of good or poor credit rating, the procedure for the application of a personal bank loan is pretty much standard, with the minimum income requirements differing from bank to bank. Interest rates may vary depending on the bank, with some banks offering guaranteed interest rates while another quoting a much higher rate based on your credit score or income.  They usually come with an effective interest rate of around 12% to 15%, and the failure to exercise prudence along with the misuse of borrowed fund often lead to problems for the borrowers.

For some, a degree is the essential to higher paying jobs while others believe it is no longer a pre-requisite for success. However, when the lack of capacity to pay off the student loan outweighs its prestige, your degree becomes a burden instead. With tuition fees easily crossing $50,000 and with the loan interest rates ranging between 4.5% to 5.39%, it is to no surprise that aspiring graduates fall victim to the student debt trap. If after years of joining the workforce and paying thousands of dollars have barely made a dent in repaying your student loan principal then, this investment in your 'further education' has been over-leveraged.

 

This is one of the most expensive kinds of debt you could get into, with interest rates ranging between 25% to 29% per annum. Credit card debt can spiral out of control very easily as you are being charged interest not just on the money you’ve used but also on the interest itself. 

Often the last alternative after all the other unsecured loan options are exhausted, it is to no surprise that this industry generally services the needs of low-income individuals. With sky high interest rates second only to illegal loan sharks, most borrowers have an unmanageable size of debt owing to multiple lenders from seeking new loans with the third or forth moneylender to avoid being subject to significant late payment fees from the first and second lender.

"The only way for moneylenders to earn a profit from low-income borrowers is through late fees," said the President of Moneylenders Association of Singapore.

Another slow-burning debt trap with an 'easy payment plan' which gives the consumer the faux confidence to make a big purchase that he cannot afford. Retail merchants profit by charging interest rate as high as 33.99% when consumers do not pay on time. With repayment period of up to 72 months, such payment plans can be offered even for small purchases. This could be detrimental if the purchase is made outside one's financial means, and have the debtor entrenched in a cycle of debt.

Relevant article: https://www.channelnewsasia.com/news/cnainsider/3000-became-30000-truth-retailers-instalment-plans-hire-purchase-10468454 

People fall into debt problems for many reasons. While overspending to fund a lifestyle beyond one's means is a common cause, there are other various circumstances which could hit us all in unexpected times. Medical bill is one which hits hard, especially when one is without insurance coverage. It can come at you personally or when your business runs into trouble from an accident at your establishment. Not far behind are job woes, where loss of employment could be due to also health reasons, or retrenchment. Be it an involuntary loss of employment or a pay-cut, the essentials are still essential. Utilities like gas, electric, water and phone bills are easily among the largest household expenses and when you're left holding on to these bills, do avoid further usage of unsecured credit such as credit cards for payments as you may wind up with more money woes. 

Renovation bank loans are capped at $30,000 or six months of your income, at a typical interest rate of about 5% per annum, or lower as compared to 6% to 9% for personal loans and 25% to 30% for credit cards. Unfortunately, the renovation loan amount is usually insufficient to finance the whole home renovation due to the loan cap. For the same reason, many renovation contractors are quick to offer direct financing or in-store hire purchase schemes as one of their perks, often with no minimum income requirements. However, this 'perk' comes at the contractors' own terms, often to the possible detriments of the borrowers with interest rates of as high as 36% per annum.

Most companies are committed to investing their resources in the training and development of their employees by promoting the attainment of marketable skills. When the course or tuition fees are sponsored for by the company, there is a reasonable expectation that the employee who had gone through the education to apply the knowledge and skills on the job. The expectation usually comes with a bonding period of service with the employee's organisation, depending on the course or tuition fees. That said, it is still common for an employee to break the bond for reasons varying from an abusive work environment, bad management or misrepresentation of job description, to simply a case of individual's poor judgement. Breaking the bond will require the employee to repay the entire cost of tuition fee to the company or a pre-determined sum of money as liquidated damages, which may come with compound interest for some organisations.