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    People in Singapore often take loans believing that they will be able to clear their debts, only to find that it has snowballed and become much more difficult to repay.

    The most common causes of a seemingly unmanageable debt burden are losses in business, uncontrolled spending, or a loss of employment. Fortunately, there are a few time-proven strategies meant for helping anyone become debt free in Singapore.

    1. Create a budget

    debt free budget

    The primary goal of making a budget is to keep track of your expenditure. This budget will help you to identify areas where you can cut costs in your personal life or company, and let you know how much money you have to pay off your debts on a monthly basis.

    The first step is to create a personal or business budget, depending on which debt you are trying to pay off.

    Make a comprehensive list of all your expected expenditure for each month (personal or business). This list should be as detailed as possible to avoid encountering a sudden rise of unforeseen expenditures. Additionally, set aside around 10% of these expected expenses for unforeseen expenditures as well.

    Next, make any lifestyle changes you must to speed up your process of becoming debt free. Take the time to determine which expenses are optional and can be done away with. If you’re spending a lot of money on things you don’t really need, these must be the first to go.

    You can also consider replacing expensive items with cheaper alternatives for the time being. For example, instead of purchasing branded clothing, you can consider wearing non-branded clothes; instead of dining out, you can try cooking at home.

    It is crucial to keep track of all your expenses, and there are several free apps that can help you to do this with minimum hassle.

    2. Implement a balance transfer

    debt free balance transfer

    In Singapore, credit card companies and banks allow you to consolidate your credit card debt through implementing a balance transfer, which makes it easier for you to pay off your debts and prevent it from rising exponentially.

    If you’ve incurred credit card debt with multiple credit cards, you can apply for a balance transfer with your credit card company. This will consolidate all of your credit card debt to a single account. The amount of interest that you will have to pay will also be lower (or even non-existent).

    Your credit card company will charge an administrative fee for the balance transfer, which usually amounts to around 2% of the outstanding sum owed.

    However, remember that a balance transfer is interest-free for only a certain amount of time (three to twelve months). Once the interest-free period expires, you will start incurring a heavy interest on your debt.

    Hence, you should only implement a balance transfer if you’re confident about paying off the entire credit card debt before the interest-free period expires.

    3. Repay high-interest debt with a low-interest loan

    debt free low interest loan

    The average interest rate for a personal loan in Singapore is around 8% to 10%. In comparison, credit card debt charges an interest rate of around 20%. Hence, it makes fiscal sense for you to take a personal loan if your credit card debt is unmanageable.

    Additionally, personal loans can be paid off at a slower rate of one year to several years, while credit card debt needs to be cleared every month. If you replace your credit card debt with a personal loan, you can take a longer time to repay the same amount at a lower interest rate.

    4. Seek a debt consolidation plan to become debt free

    debt free debt consolidation plan

    For those who are struggling with multiple debt repayments, a debt consolidation plan can consolidate all of your debts across every financial institution.

    Compared to notoriously high interest rates of credit cards, debt consolidation loans offered by licensed money lenders are relatively lower in interest and provide flexibility in custom monthly repayment amounts based on your capacity to pay.

    However, it is important to highlight that debt consolidation loans are only available for unsecured loans that do not require collateral. This means that secured loans such as education, property, vehicle or business loans cannot be consolidated under a debt consolidation plan.

    5. Get credit counselling

    debt free credit counselling

    If you find that it is too difficult for you to become debt free on your own and need personalised advice, you can apply for credit counseling with Credit Counselling Singapore.

    Credit Counselling Singapore is a professional organisation dedicated to helping people in Singapore become debt free through counselling and their resources.