Convert unsecured debt into lower-cost term loan

Singapore citizens and permanent residents with outstanding unsecured debt can get support under new measures.
Singapore citizens and permanent residents with outstanding unsecured debt can get support under new measures.ST PHOTO: JASMINE CHOONG

Singapore citizens and permanent residents with outstanding unsecured debt - this refers to credit card loans and other non-credit lines - can get support under the new measures.

The Special Financial Relief Programme (Unsecured) allows banks and card issuers to help borrowers who have suffered a temporary loss or decline in income and are facing difficulties meeting repayments during the pandemic.

The programme - a collaboration between the Monetary Authority of Singapore and the financial industry - gives them an option to convert their high-interest unsecured credit card and revolving balances into a lower-cost term loan.

Eligible borrowers can opt into the scheme by providing proof that their income has been reduced by at least 25 per cent after Feb 1.

Their repayments should be between 30 and 90 days past due at the point of application.

The new term loan will have an effective interest rate capped at 8 per cent for up to five years. There will be no early repayment penalty and it will not be reflected as a restructured loan in the borrower's credit bureau report.

FREQUENTLY ASKED QUESTIONS

Q Should I apply to convert my outstanding unsecured debt into this term loan?

A Before taking up this term loan, consider if there are other credit products offered by banks and other credit card issuers, such as balance transfer, monthly interest-free instalment plans or debt consolidation plans, that can help you lower your overall interest and debt repayment.

Whatever option that you choose, it is important to make sure that you are able to meet the monthly payments in full to avoid the accumulation of debt.

Q What types of unsecured credit facilities are covered under the initiative?

A It covers higher-cost credit cards and revolving credit facilities. Non-revolving personal loans, such as renovation loans, and secured credit facilities such as car loans and mortgages, will not be included.

 
 

Q What if I am unable to make repayments on my term loan?

A You may incur late payment fees and interest charges if you do not make repayments on time. Speak to your lenders to explore possible options and they may be able to help you restructure your repayments.

Q Can I convert my outstanding unsecured revolving credit balances into term loans more than once?

A The conversion can be done only once with any single lender.

A version of this article appeared in the print edition of The Sunday Times on April 19, 2020, with the headline 'Convert unsecured debt into lower-cost term loan'. Print Edition | Subscribe