Singaporeans piling on credit card debt, home loans as economy heads deeper into recession

This article belongs to the Singapore recession watch story arc.

channelnewsasia.com :

As economic growth heads south, debts are going up. And the combination "will push many individuals into financial difficulties as jobs and income become affected", Credit Counselling Singapore (CCS) said on Thursday [23 Oct 2008]. Preliminary statistics in Aug 2008 from MAS [Monetary Authority of Singapore] show that total debt to individuals stand at S$112 billion - almost 10% up over a period of 12 months.

Credit card rollover debt has ballooned to S$3.3 billion, an increase of S$296 million over the 12 months. Housing loans are up S$6.6 billion. "Singaporeans have been piling on debt at a fast rate," said CCS president Kuo How Nam. There was also a S$2.5-billion (18.4%) jump under "other loans" (facilities given for unspecified purposes) to individuals. Mr Kuo urged consumers to "urgently examine and make every effort to reduce or restructure" their debts, especially credit cards and credit lines, which are expensive and recallable. With the credit crunch in the United States and Europe, banks here appear to have also tightened consumer lending.

- As is the case with many other economic trends, Singapore is following in the footsteps of the US. This trend about increasing personal debt burdens while the economy heads deeper and deeper into recession is the latest manifestation.

As I have talked about this issue with a couple of friends, the contrarian community's viewpoint is that eventually the coming hyperinflation will likely wipe out the real value of much of this debt, but that is subject to a number of factors, including the real inflation rate, prevailing interest rates, the terms of the debt or loan, and most importantly, the individual's holding power, where job security plays a major factor.

The advice from the community is thus : pay down as much short to medium term debt (credit cards, personal loans, credit lines) as you can, continue to pay down your long term debt (home loan, car loan), and try not to get into any new debt if you can help it. Save up as much as you can. Take a good look at your operating expenses. I know that withdrawing consumer support for the economy will doom it further. Screw the economy. There is no way that we as consumers can single-handedly rescue a global economy burdened by a thousand trillion dollars of collapsing markts, collapsing debt, collapsing derivatives, collapsing everything. It's all going to hell. Stay out of the way. Save yourself. Good luck out there.

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