More and younger Singaporeans are seeking help with debt, say financial counsellors

SINGAPORE: Overwhelmed by his family members' outstanding loans and debts, a 30-year-old Singaporean started borrowing money to help pay them off.

Two years later, the man, who wanted to be known as San, had racked up over S$80,000 (US$60,000) in loans himself with seven different moneylenders.

“I thought that by taking (more) loans, I can pay off other loans,” he told CNA.

But soon, even day-to-day household expenses started to take a toll on his budget and his repayment capabilities.

“My wife gave birth and I had to buy milk, diapers, all the things for our daughter. I had to take care of them,” he said. “Then it really hit me that I cannot be doing this anymore.”

He sought assistance from Adullam Life Counselling, a non-profit which supports those struggling with debt issues like him.

Such social services agencies usually act as an intermediary between the help-seekers and their legal creditors by negotiating on a possible repayment plan.

They also counsel and advise the debtors, and help to track their progress to a debt-free life.

MORE SEEKING HELP WITH DEBT

San is not alone in his money woes.

More Singaporeans are seeking help with debt, and they are also getting younger, financial counsellors said.

Overall, there has been a rise in the total number of individuals approaching social services agencies for assistance in managing owed monies.

Arise2care Community Service, one such organisation which specialises in helping debtors and those with gambling problems, said it has seen a 50 per cent jump in the number of help-seekers in the past two years.

The non-profit added that one in three cases have also exhausted all means of borrowing from legal creditors, with some even turning to loan sharks to service their loans.

Over the pandemic years, many who lost jobs or income, or did not have enough savings to tide them through expenses or mortgages, resorted to borrowing more, said Ms Jean Lee, communications manager at Adullam Life Counselling.

“If you live paycheck to paycheck, and something like COVID-19 happens, often you do not have enough savings to service your debt, resulting in late fees and more interests” she said.

“Then it spirals because … the most common strategy is that you will go and get another debt – quick money – to service that.”

Aside from succumbing to bad debt due to family commitments, particularly younger debtors borrow for more reckless reasons such as funding investments and fueling gaming addiction, financial counsellors said.

YOUNGER DEBTORS

In the past, Adullam Life Counselling used to see debtors in theirs 40s to 60s in such situations, said Ms Lee.

“But right now, the second largest group in our counselling centres are those between their 30s and 40s,” she said.

About 29 per cent of those seeking help at the organisation are between 31 and 40 years old, just slightly behind the 41 to 50 age range, which is the largest group at 30 per cent.

Some debtors are even in their early 20s or younger, said Ms Lee.

At Arise2care Community Service, its youngest helpseeker is a 16-year-old teenager who squandered S$80,000 of his parents’ money to feed a gaming addiction.

Another individual the non-profit helped was a 41-year-old who wanted to be known as Mark. He said he fell into bad habits and incurred multiple debts from different moneylenders.

“I didn’t have self-control, I couldn't manage my expenses well, and I gambled. Sometimes when I felt that I needed more cash, I would turn to gambling, and things got worse,” he said.  

“All these led me to turn to unsecured loans … which I regret as I got into deeper trouble because the interests are very high. Some months, whatever I earn, they just go to pay for those loans.”

His sister signed him up for the agency’s rehab workshop, where he attended weekly sessions with counsellors who helped him liaise with creditors for a sustainable, longer-term repayment plan.

With the organisation’s help, Mark said he saw his principal outstanding debts reduced after about six months, and hopes to be completely debt-free by the end of the year.

GETTING INTO DEBT

Some younger debtors also invested in get-rich-quick schemes that fail or turn out to be scams, said financial counsellors.

“A lot of them dabble in cryptocurrency or shares and stocks trading, and they are sold with the idea that it's better to use other people's money to get rich quick,” said Ms Lee.

“These (schemes) may sound too good to be true, but it's the kind of wealth that is just so promising that they will dump all their money into it. Some of my clients … in hopes of getting back their money, they borrow to pump in even more money … and end up in a larger debt.”

Another key reason for youth borrowing more is the availability of buy now, pay later service providers, which have become popular in recent years.

“A lot of (people) are also sold on the idea of a buy now, pay later model. It (seems) embedded into society – through social media – that it is okay to borrow debt to sustain the lifestyle that you want to have,” said Ms Lee.

Ms Joey Tan, centre manager of Arise2care Community Service, said that many are attracted to such unsecured loans as they are easy to access and do not require a good credit score.

These instalment plans are typically interest-free. However, miss a payment, and consumers could get charged up to 5 per cent interest on the outstanding amount.

“(For these providers), they don't really need to provide a lot of details to take on a loan and the loan tenor is also getting longer. A lot of our clients use these facilities to the maximum and to their limit before they come to us,” she said.

To avoid over-leverage, such service providers have guidelines such as users can only have a maximum of S$2,000 in outstanding payments.

NEED FOR FINANCIAL EDUCATION

However, agencies said that is not enough to solve the problem.

High interest rates and a slowing economic outlook ahead could make bad debts worse.

They pointed to a need to beef up financial education for youths.

“Financial education for the younger ones needs to be more engaging and suited to their level,” said Ms Tan. “They should have an idea of what to do with their money once they start earning. Expenditure planning is so important.”

To raise awareness on savings, insurance, and investment needs, the Monetary Authority of Singapore (MAS) launched a basic financial planning guide last month.

Social services agencies are also encouraging those who fall into debt to speak out and seek help.

“Often when you are stressed, you do not make good financial decisions,” said Ms Lee.

“So it's good to speak to people who specialise in it, so that they can help you, (such as) third parties like us. The earlier you seek help about your debt situation, the faster and easier it can be resolved.”