Untitled Quiz

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Questions and Answers

What was the unsecured borrowing limit per monthly income from 1 June 2017 to 31 May 2019?

24 times

48 times

18 times (correct)

12 times

What type of debts are characterized as unsecured debts?

Secured loans and credit unions

Home loans and car loans

Student loans and mortgages

Credit card debts and personal loans (correct)

What happens to borrowers whose unsecured debts exceed six times their monthly income?

Their credit limits cannot be increased (correct)

They can apply for more credit cards

They are allowed to consolidate their debts freely

They become eligible for government loans

What is the purpose of the Credit Limit Management Measure introduced in 2018?

To help borrowers avoid exceeding debt limits Signup and view all the answers

What was the previous maximum unsecured borrowing limit before the changes starting from June 2019?

18 times monthly income Signup and view all the answers

How can borrowers check their outstanding balances and credit limits?

By buying a credit bureau report Signup and view all the answers

Which of the following statements about credit card debt is true?

It can contribute to exceeding unsecured debt limits. Signup and view all the answers

As of June 2019, what is the new limit for unsecured borrowing based on monthly income?

12 times monthly income Signup and view all the answers

What is the purpose of the Home Protection Scheme?

To protect against losing your flat Signup and view all the answers

What is a feature of the premiums for the Home Protection Scheme?

They are one of the lowest in the market Signup and view all the answers

How are the premiums for the Home Protection Scheme paid?

By auto deduction from OA Signup and view all the answers

What is required from co-owners in terms of coverage under the Home Protection Scheme?

The total cover must equal at least 100% of the loan Signup and view all the answers

What events does the Home Protection Scheme cover to support loan repayments?

Death, terminal illness, or total permanent disability Signup and view all the answers

What online service can individuals use to check the amount of CPF they can use?

my cpf online services Signup and view all the answers

Which of the following is NOT a benefit of the Home Protection Scheme?

Provides coverage for lifestyle changes Signup and view all the answers

What happens if an individual buys another property while already covered under the Home Protection Scheme?

They must apply for a new policy for the additional property Signup and view all the answers

What is required before using excess OA savings towards a second property if the buyer has at least one property that lasts until age 95?

Set aside the Basic Retirement Sum in OA, SA/RA Signup and view all the answers

What must a buyer do if they have no property that can last them until age 95?

Set aside the Full Retirement Sum in OA, SA/RA Signup and view all the answers

What is the impact on OA savings when purchasing a second or subsequent property?

Only the amount above the Retirement Sum can be used Signup and view all the answers

If a buyer sells their property, what must they consider regarding their CPF?

They need to assess how much CPF can be used from the proceeds Signup and view all the answers

Which of the following statements is true regarding the retirement sums and property ownership?

Retirement sums must be established to leverage CPF for multiple properties Signup and view all the answers

What factor determines the type of retirement sum a buyer must set aside?

Whether the buyer has a property that can last until age 95 Signup and view all the answers

Which of the following correctly describes the implications of having no suitable property until age 95?

The buyer is limited in CPF usage until the Full Retirement Sum is set aside Signup and view all the answers

If a buyer wants to use their OA savings for a second property, what must they first establish?

The required retirement sum based on their property status Signup and view all the answers

What is required for individuals to support a mortgage when decoupling for private property?

They must be able to support the mortgage loan individually. Signup and view all the answers

What is one of the disadvantages of applying for BTO as an applicant and occupier?

The occupier does not have legal rights to the property. Signup and view all the answers

How does decoupling affect the ability to avoid ABSD when purchasing property?

Decoupling can avoid ABSD if it aligns with financial sense. Signup and view all the answers

What must an occupier complete before purchasing a private property without incurring ABSD?

Fulfill the Minimum Occupation Period (MOP). Signup and view all the answers

Since when have changes in HDB flat ownership been allowed only on specific grounds?

April 2016 Signup and view all the answers

What can happen if claims to the property are contested by an occupier?

The case might involve costly legal fees with no guaranteed success. Signup and view all the answers

What does applying for a property as an occupier prevent regarding ownership?

Claiming rights during a legal dispute. Signup and view all the answers

What is a condition that must be met for a couple to avoid ABSD by BTO application?

They must trust each other completely. Signup and view all the answers

What is one way to generate regular income from a flat for retirement?

Rent out the entire flat Signup and view all the answers

What incentive is provided for right-sizing to a smaller flat for those aged 55 or above?

Silver Housing Bonus Signup and view all the answers

At what age can individuals participate in the Lease Buyback Scheme?

65 years or older Signup and view all the answers

What must be done with the sale proceeds used to top up the Retirement Account (RA)?

Join CPF LIFE for monthly payouts Signup and view all the answers

Which age group qualifies for the Silver Housing Bonus?

Aged 55 and above Signup and view all the answers

What is a primary benefit of selling the tail-end of a flat’s lease to HDB?

Eligibility for the Lease Buyback Scheme bonus Signup and view all the answers

What should be done to receive a cash bonus through right-sizing to a smaller flat?

Top up the Retirement Account Signup and view all the answers

What is a consequence of not renting out a flat or spare room for retirement income?

Potential loss of rental income opportunities Signup and view all the answers

What is the main characteristic of a secured loan?

It is backed by collateral or an asset. Signup and view all the answers

Which option is NOT one of the five rules of credit?

Always borrow the maximum amount possible. Signup and view all the answers

What can happen if a borrower defaults on a secured loan?

The lender retains the right to seize the collateral. Signup and view all the answers

What distinguishes an unsecured loan from a secured loan?

Unsecured loans have higher interest rates. Signup and view all the answers

What is a key benefit of paying your credit card bill in full before the due date?

You will avoid all interest charges on your balance. Signup and view all the answers

Which statement about credit card minimum payments is correct?

All balances will incur interest, even if only the minimum is paid. Signup and view all the answers

Why might an individual incur debt that exceeds 24 times their monthly income?

They lack a clear understanding of their financial situation. Signup and view all the answers

What is a common feature of revolving loans?

They are paid back based on usage. Signup and view all the answers

What typically happens if late payment is made on a credit card bill?

A penalty charge will be applied based on unpaid balance. Signup and view all the answers

What could be a consequence of using assets to pay back a defaulted loan?

It creates additional financial burdens. Signup and view all the answers

Study Notes

Credit Management

Credit management is a topic in Household Finance.
The course covers topics like credit, housing, and avoiding debt traps.
The concept of credit includes debt, loans, leveraging money, and borrowed money.
Interest is the cost of borrowing; it's not free.
Understanding financial situation is key to using credit responsibly.
Only incur debt when necessary.
Repayment is important and comes with a cost.
Borrow only the necessary amount.
Consider your ability to repay the debt.

Secured Loans

A secured loan uses an asset as collateral (e.g., real estate, stocks, vehicles).
If the borrower defaults, the lender can seize and sell the asset.
The lender may also ask for extra security or a repayment plan.

Unsecured Loans

Unsecured loans do not require collateral.
Examples include credit cards, credit lines, and overdrafts.

Types of Credit

Loans can be secured or unsecured based on collateral.
Unsecured loans tend to have higher interest rates than secured loans.
Term loans have fixed repayment periods.
Revolving loans are repaid based on usage.
Your assets can be used to pay back a defaulted loan.

Credit Cards

Credit Cards are a form of unsecured credit.
Interest-free for a specific period if the balance is paid in full before the due date.
High interest rates if the balance is not paid in full.
Late payment fees charged if minimum payment is not paid by due date.
Examine the statement promptly and report any errors.

Credit Card Bills

Pay at least the minimum amount by the due date to avoid late payment charges.
Even if paying the minimum, interest will still accumulate on the outstanding balance.
Interest also applies to new purchases until full settlement.
Use your credit card only when affordable.

Mired in Debt

58,000 individuals had aggregated unsecured debt exceeding their annual income in Feb 2019.
This is down from 85,000 four years prior.
The amount of these debts was reduced to $5.2 billion from $7.5 billion.
10,000 of those individuals had debts exceeding 24 times their monthly income in Feb 2015. This has since reduced to 70% of that number

"It All Started Small"

Mr. Toh had a high-paying job but mismanaged his credit card usage.
He incurred significant debt ($103,000) by making minimum payments.
Credit card debt snowballed due to interest and missed payments.

Continued

Mr. Toh's financial situation worsened after losing his job.
He struggled to manage minimum payments on credit card debt.
He took out a bank loan to pay down the credit card debts but interest accumulated further.
Seeking assistance from a debt management program (CCS) was crucial for him to resolve his problems for a clearer future.

Credit Card Debt

Credit card interest can easily snowball.
Interest is calculated daily on outstanding amounts.
Interest accrues on any unpaid balance.
Settle payments in full to avoid accumulating interest.

Credit Card Usage

Use credit cards as a cash management tool.
Use reward points for essential expenses.
Choose cards that offer cash rebates.
Choose cards that match spending habits.

Credit Cards Usage - As a Form of Credit

Settle payments in full;
Keep track of card expenses.
Pay on time.
Avoid rollovers.

Personal Loans

A personal credit line is revolving credit (aka overdrafts).
High-interest rates.
Pay only when borrowing.
Pawnshops offer collateralised loans (e.g., jewelry).
Loan amounts are 60% to 80% of collateral value.
Collateral is sold if repayments fail, with excess refunded.

DBS Cashline

Eligibility requirements, fees, and interest rates for DBS Cashline are provided.

A Good Credit Score

Don't apply for too many credit facilities in a short period.
Always repay creditors on time.
A long track record of on-time repayments can help boost credit ratings.

Young Adults - Personal Debt

Young adults (ages 20s) have taken on increasing amounts of debt (not including credit card debt) since 2020.
Average personal loans and overdraft balances for those under 30 rose by 23% between 2020 and 2021, and about 42% higher than average four years before.
Unemployment and lower earnings are potential factors leading to more borrowers taking loans.

In the past...

Individuals were allowed to borrow up to 48 times their monthly salary.
No limit on the number of credit cards or an overall borrowing limit.

MAS Rules

Industry-wide borrowing limits varied as follows:
- 1 June 2015 to 31 May 2017: 24 times of monthly income
- 1 June 2017 to 31 May 2019: 18 times of monthly income
- From 1 June 2019: 12 times of monthly income

Credit Limit Mgt Measure – Avoid the Debt Trap

Limit how much outstanding debt one can have on unsecured loans.
Specifically for borrowers with unsecured debt exceeding six times their monthly income.
Banks are restricted from granting increases in unsecured credit limits when this limit is exceeded.
Borrowers can continue using existing facilities.
Check credit limits with banks.

Credit Limit Mgt Measure – Avoid the Debt Trap (Exclusions)

Excludes secured loans for property and car loans or unsecured loans for business, medical and education spending.
The limit does not apply to borrowers with incomes of $120,000 or over or those with net personal assets exceeding $2 million.

Industry-wide Borrowing Limit

The implementation dates and borrowing restrictions.

Debt Management Plan (DCP)

Introduced by financial institutions in January 2017 to reduce debt over time.
Consolidated debt balances across multiple financial institutions.
Offered lower interest rates than credit cards and credit lines.

DCP (Examples)

Debt consolidation customers of Citibank Singapore can choose a loan tenure of up to 7 years.
Receive a credit card with a limit of one month's income.
Insurance coverage up to $160,000 is possible.

Debt Management Plan (DMP)

Offered by Credit Counselling Singapore (CCS) since 2004.
Non-consolidated debts under one institution.
A monthly plan to gradually resolve debts across multiple creditors.

Debt Repayment Scheme (DRS)

An alternate to bankruptcy, where debt does not exceed $150,000.
Referrals to the Insolvency Office to determine eligibility, based on gainful employment and debt criteria.
Often takes 5 years for completed repayments.

How they compare (DCP, DMP, DRS)

Compares the three debt management plans (DCP, DMP, and DRS) based on various factors, such as debt types, minimal debt amounts, interest rates, tenure, and credit facility access.

Managing your debts (Case Studies)

Provides real-life case scenarios for borrowers A, B, and C, including their debts, incomes, repayment plans, and reasons for indebtedness.

Housing

Public Sector Properties (e.g., HDB flats, DBSS) and
Private Properties (e.g., apartments, condominiums, landed properties, detached houses, semi-detached houses, terrace houses).

HDB

New HDB Flats are sold at subsidized prices.
Locations are in non-mature estates.
Applicants apply directly to HDB.
HDB Resale Flats are sold based on negotiations.
Flats are generally in all locations;
Flats are purchased from the open market.

Income Ceiling

HDB Income ceiling is $14,000 (families), previously $12,000 and $7,000 (singles), previously $6,000.
Flats are named based on room count (e.g. 5-room flats have 3 bedrooms).
EC Income Ceiling is $16,000, previously $14,000.
Condos are named based on bedroom count.

More support for first-time home buyers

Maximum Enhanced CPF Housing Grant increased from $80,000 to $120,000 (families) and from $40,000 to $60,000 (singles).

Pricing

New BTO, resale HDB, and Condo prices depend on location, size, and leasehold.

Fees

Application fees for resale vary from $40 to $80.
Booking fees for New HDB flats range between $500 and $2000.
Booking fees for DBSS/ECs are 5% of purchase price.
Booking fees for resale flats are up to $5,000.
Stamp duty, legal fees, conveyance fees, and caveats are also involved.
Other miscellaneous costs may apply.

Staggered Downpayment Scheme (SDS)

Revised payment schedule for eligible couples, effective from June 2024.
Couples must be current students, recent grads or NSMEN.
At least one party must be 30 years old or below and married or applying for a flat under the Fiancee-Fiancee scheme.
Allows payment of down payment in two installments.

Loan Type (SDS)

Downpayment percentages at agreement for lease and key collection.
Percentage based on the type of loan (HDB loan of varying LTV)

Buyer's Stamp Duty (revised)

Rates for residential and non-residential property based on purchase price.

New property cooling measures in Singapore - Adjustments to Additional Buyer's Stamp Duty

Adjustments to Additional Buyer's Stamp Duty percentages based on citizenship (Singaporean citizens versus Foreigners), and permanent residents.
Rates are presented for both 1st, 2nd and subsequent Residential Properties.

Example

A case study of Mr and Mrs Tan, who have an existing HDB and are looking to buy a private property.

Q: Is applying for BTO as applicant and occupier (husband and wife) a good way to avoid ABSD?

Lack of legal rights as an occupier compared to an owner.
Potential complications in case of divorce.

Prime Location Public Housing Model

Stricter buying & selling conditions.
Clawback clause upon resale (6%).
Minimum occupation period (10 years).
Income restrictions for resale buyers (capped at $14,000).
Owners prohibited from renting the whole unit even after the MOP.

Prime Location Public Housing Model - Key Eligibility Conditions

Citizenship (at least one Singaporean citizen or PR), family nucleus and whether or not the buyer owns a private property and whether or not they have disposed of it in the past 30 months.
Income Ceiling.

Ownership conditions for BTO and PLH models

Compares conditions for BTO and PLH models in terms of resale of flat, investment in private property, renting out whole flat and spare rooms, and MOP periods.

New flat classifications at a glance

Standard, Plus, and Prime classifications for new Build-To-Order (BTO) flats.
These classifications are based on location and subsidies provided.

Cooling Measures

Rationale for cooling measures to moderate the demand in resale markets.
Stricter repayment criteria.
Wait-out period for those transferring from private property to HDB
LTV ratio reduction for HDB loans.

Housing (mortgage) loan

Mortgage is a loan for homes from banks.
Mortgagor's obligation to repay within an agreed interest rate.
The home is collateral.
If mortgagor defaults, mortgagee can take possession of it and recover debt.

Total Debt Servicing Ratio (TDSR)

TDSR is a measure of a borrower's ability to service all their debts.
The maximum limit that a property buyer can bear is 55%.
This is compared to 60% previously.
This limit covers student loans, credit cards, car loans and any other personal loans.

Loan-To-Value Ratio (LTV)

Maximum amount that borrowers can borrow for a home.
This proportion is based on the market value or price of the property.
For instance, at 75% LTV, one can borrow up to 75% of the property's market value or price.
For HDB loans, the maximum LTV is 75%, formerly 90%.
Banks allow for 20% balance beyond the 75%, payable using CPF or cash.

Outstanding Home Loans

For a second or subsequent home loan, LTV is 45% for loan tenure 30 years or less and 25% if greater, and 35% if already having two outstanding home loans, 15% for those exceeding loan tenure of 30 years or more, or if the loan extends past age 65.

Home Protection Scheme

Insurance protection against losing your flat due to death, terminal illness, or total permanent disability.
Premiums are among the lowest in the market.
Premium payments deducted from the Ordinary Account (OA).

What happens when I sell my property?

Principal amount, earned interest, are deposited into the CPF Account.
Using OA savings to acquire your next property, if under 55.
Using RA savings, if above 55.

What happens if I have a negative sale?

In cases of negative sale proceeds, sellers are not required to cover for the difference.

Check your required refund online

Use SingPass to log into their CPF website, go to 'My Statement'.
In Section C, select 'property'.
Go to 'My Public or Private Housing Withdrawal Details'.
Similarly, use the Mycpf mobile app, 'My Housing' section

Voluntary Housing Refund

Refund any amount from the principal amount withdraw for purchasing
Interest will be accrued to the housing refund.

How can I unlock the value of my flat for my retirement?

Rent out the flat.
Downsize and receive a cash bonus for your RA.
Sell the tail end of your flat's lease to receive a LBS bonus.

Bank Loans (Interest rates)

Different types include fixed-rate, fixed deposit rate-pegged, floating rate, and board rate.

Bank Loans (Example)

Example interest rates for different loan types and duration period.

2-in-1 Home Loan (DBS)

A combination of fixed and floating rates for home loan.

Here's how it works (2-in-1 Home Loan)

A mix of 2-year fixed and floating rates, and how this impacts the interest rate over the loan tenure for Case 1.

Prepayment and Refinance

Prepayment is repaying a mortgage before the schedule.
Refinancing is taking out a new mortgage for the existing loan.

Is a HDB flat an investment or Home for life?

HDB flat can be sold after MOP.
Property prices have risen despite Covid Pandemic.
Reasons for the rise include upgrading to a larger flat/private property or being closer to parents or schools.

8 Tips to avoid Debt Trap

Curb overspending by evaluating your lifestyle given your current income.
Stick to a budget by understanding wants versus needs.
Pick a suitable credit card, assessing your own everyday spending habits.

Tips to avoid Debt Trap

Maintain a good credit history to build up eligibility for loans or credit.
Avoid relying on future income (salary increases or bonuses).
Understanding financing options, such as personal loans to reduce interest rates compared to credit card utilization.