Financial experts such as MoneySmart chief Vinod Nair say it's easier to stay out of debt than to get out of debt.
"The adage 'prevention is better than cure' is especially apt here. If you're disciplined in your finances and manage your money while saving up for possible emergencies, you'll be well equipped to avoid the credit trap," said Mr Nair.
Here are nine tips.
1. MAKE SURE YOU CAN SERVICE THE LOAN
Thorough financial planning is crucial before you apply for a loan. Know how much you can repay each month, and how this could affect household expenses over the long term, said Mr Anthony Seow, who heads cards and unsecured loans at DBS Bank.
2. APPLY FOR THE RIGHT TYPE OF CREDIT
For example, apply for a study loan if you are pursuing further studies, instead of borrowing through credit cards, which comes with a higher interest rate, said Credit Counselling Singapore (CCS) general manager Tan Huey Min.
Ms Choo Wan Sim, who heads cards and payments for Singapore at UOB, suggested weighing card benefits and rewards, and using your card for specific purposes.
"This makes it easier to avoid overspending on your credit card. If you like to travel, look at cards with, say, the best earning rates for frequent flyer miles," she advised.
3. PAY YOUR BILLS
Mr Nair advised paying credit card bills in full and on time to avoid interest and late fees. Get fees and charges waived if possible, as they add up.
4. CONSIDER LOANS WITH LOWER RATES
If you cannot pay in full and on time, consider taking a personal loan with an interest rate lower than those for credit cards, said Mr Nair.
5. SET UP PAYMENT ALERTS
To avoid being late on card payments, set up alerts or calendar reminders, or go for services such as automatic Giro payments, said Mr Seow.
6. REDUCE YOUR CREDIT LIMIT
Lower the limit on your credit card to curb spending. It doesn't have to be double your monthly income, said Mr Nair.
7. HAVE AN EMERGENCY FUND
An emergency fund equivalent to at least six months' salary offers a buffer in case of an emergency, and saves you from getting into debt.
8. REVIEW YOUR LIFESTYLE
Mr Matthias Dekan, who heads customer value management at HSBC Bank (Singapore), suggested changing spending habits.
For example, if you own and drive a car, consider making use of public transport instead - taking the MRT, a bus or a taxi should provide significant savings.
He also pointed out: "Limit your access to credit facilities, and use them responsibly. You should not view unsecured credit facilities as a means to acquire or finance an extravagant lifestyle that is not commensurate with your income."
9. GET INSURANCE
Mr Desmond Tan, OCBC Bank's lifestyle financing head, noted that many people run into financial difficulties because of extenuating family or medical circumstances.
Planning ahead by getting insurance coverage, for instance, could help such people tremendously, he said.