Folks,
I wrote to ST Forum in response to their article on Sunday re people who kena or run the risk of kena-ing bankrupted because they spent on stuff they can ill afford.
Hope none of the readers of my blog fall into this category.
Read on…..
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I refer to your Sunday Times article “Trapped by lure of the high life”.
I am disturbed yet not surprised by the prevalence of financial problems caused by over-stretching of credit amongst Singaporeans.
Perhaps the relevant authorities should review policies that may have created “financial traps” for those who are financially less savvy and hence less prudent.
One example is hire purchase schemes.
It has been advertised that one can hire purchase up to 10 times of one’s monthly salary.
Such installment schemes create an artificial sense of affordability of high priced items like large screen high definition LCD TVs.
Worse still, the interest rates for these schemes range from 6-12%, depending on the purchase value and length of payment.
For a person earning $2,000 per month, taking a $20,000 hire purchase could cripple him financially if he loses his job.
Other financial traps include “zero dollar down” car loans, deferred payment schemes for houses and “easy credit” facilities offered by banks.
For starters, maybe it is time for the government to step in to protect those of the lower income group.
Based on one’s NRIC number, set limits of personal credit lines and hire purchase based on say, 4 times, of monthly salary.
For car loans, for those earning less than $2,000 per month, a guarantor is needed.
This may deter these people from over-stretching themselves financially and stem a growing social problem.
Words of financial wisdom from my grandpa: “If you don’t have enough cash in the bank to pay for one-third of the item you want to buy, you will still not be able to afford it even if you take a long term loan.”
Cliché but true.