If you’ve lived in Singapore long enough, the alarming reports about skyrocketing consumer credit are nothing new. One finding estimates that one out of every three Singaporeans took out a personal loan in 2020 alone

Sure, we’re loosening up to the idea of personal loans, but what’s causing this shift? Have personal loans become cheaper and accessible, or do we lay blame at the door of the exorbitant cost of living? In this article, we explore five reasons why personal loans are becoming rife in Singaporean households.

Living in Singapore

Residing in this city is getting more expensive by the day. The most obvious reason why locals have doubled their borrowing is to cover basic living expenses. Having topped the charts consistently as the most expensive country to live in, Singapore’s economic outlook is somehow dispiriting. Prices of different goods and services, including education, food, and health care continue to inflate at a steady rate, making it difficult to save any money. To add to that, the pandemic has shaken businesses and jobs, hence we’ve all done some upward adjustments on our budgets. As a result, personal loans have become a necessity to help take the sting out of these bumpy economic times.

Costly housing and renovation costs

Of course, accommodation remains to be the costliest element in a Singaporean’s budget. Whether you’re renting or living in your own home, you’re probably parting with no less than 930 SDG/month. Keep in mind that this amount will only get you a tiny studio apartment that’s far from fancy. If you want to buy a 400SQ feet property in a neighborhood like Orchard Road, expect to shell out at least 750,000 SDG ($550,000). In all honesty, this is anything but cheap. With accommodation gobbling up almost 40% of every household’s income, locals find themselves gravitating towards personal loans to help manage mortgages, or cover other home-related expenses like garden work and repairs.

Travelling and shopping

If there are two things that Singaporeans love, it’s good food and enjoyable vacations. Home to opulent shopping malls and relaxing holiday destinations, it’s no surprise that most of us take loans to fund our time off. It’s estimated that the average Singaporean family spends about $4800 annually on vacations. Whether you want to take a local trip or travel abroad, personal loans help you cover the expenses that come with it. Think flight tickets, vacation packages, and site-seeing. One good thing is that we now have special travel loans that come with a single-digit Annual Percentage Rate. These loans are generally cheaper, faster, and more convenient since they’re parceled into holiday packages. However, taking loans for leisure is a hot-button topic that continues to stir a debate. But we’ll discuss that another time.

Singaporeans take personal loans to pay off credit card bills

Debt consolidation is another key incentive that pushes Singaporeans to borrow frequently. Debt consolidation is, in layman’s language, synonymous with robbing Peter to pay Paul. If let’s say you owe a hefty credit card bill with a high-interest rate, you can take a low-interest personal loan and use it to offset your credit card debt. On the surface, this move looks like a sting in the tail. Why take a loan to pay off another loan? More like going in circles, right? But here’s the catch: taking a personal loan to make a cash payment for your credit card debt helps you save money on interest. With the average interest for credit cards in Singapore at 25%, it’s indisputable that these low-interest loans are worth a try. Most of them have an interest rate of between 3%-9%. The best part is, lenders now have specific low-interest loans with added special benefits for the sole purpose of consolidating debt.

Personal loans makes It’s easier to sort out financial emergencies

We’ve all been there before: your car is playing games, you need to fix it before Monday morning, and you’ve exceeded your credit card limit. When you find yourself in such tight spots, it’s only normal to think of a personal loan provider to bail you out. This is why more Singaporeans are turning to personal loan providers as a quick fix for financial crises like accidents, car breakdowns, or card declines. Given that you can access instant approval using your Sing pass My info, it can take as little as one hour to have money in your bank. From the reasons above, it’s clear that applying for a personal loan in Singapore is not as bad as it was in the past. When used responsibly, personal loans can help solve financial issues and give your budget some breathing space.