Episode 2: Borrowing wisely

Summary

Smart borrowing starts with knowing your credit score — how it’s calculated, why it impacts loan approval, and how it shapes your interest rates. In this episode, our expert guests Laura and Yee Hui from Credit Bureau Singapore (CBS) break down the difference between good and bad debt, and share their tips on how to spot and avoid unlicensed lending. We also discuss debt consolidation, safe alternatives to borrowing, and learn how to avoid common debt traps in Singapore’s gig economy.

Transcript

Jacqueline: Now, we're talking about borrowing. It's not about avoiding all credit.

Don: Credit is just a tool. It can help or harm you, depending on how you use it.

Jacqueline: Absolutely. Don, have you ever borrowed out of stress, without thinking about repayment?

Don: Yes. I learned the hard way that borrowing means using someone else's money now and paying it back later, with interest.

Jacqueline: So today, we want to help you approach borrowing as a considered, informed choice — not something driven by panic or pressure. And in fact, we've got two guests joining us for this episode, don't we?

Don: Yeah. Maybe you would like to introduce yourselves to our listeners?

Laura: Hi, I'm Laura from Credit Bureau Singapore.

Yee Hui: Hello, I'm Yee Hui from Credit Bureau Singapore.

Jacqueline: Welcome, Laura. Welcome, Yee Hui. Let's start with you, Yee Hui. Could you share with us: what is a credit report?

Yee Hui: For Credit Bureau Singapore, we actually produce the credit report. We are a licensed consumer credit bureau, regulated by the Monetary Authority of Singapore — also known as MAS — under the Credit Bureau Act 2016. Our goal is to help credit providers make better lending decisions quickly and more objectively.

For CBS, we help to collect and store information on your credit history — such as loans, credit card applications, repayment records — and display them in the form of a report, also known as your consumer credit report. This information is obtained from financial institutions such as retail banks, merchant banks, finance companies, and credit card issuers licensed by MAS.

In this credit report, CBS provides aggregate credit-related information and presents a more complete risk profile of a consumer to credit providers or lenders. This helps lenders determine the likelihood of the consumer repaying, thus enhancing their credit assessment capabilities.

Don: Right. That's so useful that you collect all this information. But could you tell our listeners: why is credit health important in the first place?

Yee Hui: Maintaining a good credit rating and score is important, as it represents a person's credit standing, which banks usually take into consideration when they assess someone's application for credit facilities. Having a positive credit reputation can prove advantageous, especially when a person requires financing for significant purchases such as a mortgage, or to cover unforeseen expenses like emergency medical bills.

When facing cash-flow challenges, the inability to access borrowed funds can prompt individuals to make poor financial choices, potentially damaging their credit score as they seek alternative credit options. One should always be aware of their credit score to keep their financial health in check. The information in your credit report can also help you to better assess your financial situation, and it identifies steps to better manage credit and improve your credit score over time.

Jacqueline: Physical health, emotional health, mental health — now one more.

Don: Financial health. Credit health.

Jacqueline: Credit health. So, for all of you listening out there: it's important that if you're planning to borrow from alternative loan providers such as licensed moneylenders, you always check with the Ministry of Law's Registry. If they're not on the official list — walk away immediately. Do not look back.

Don: While the Monetary Authority of Singapore, or MAS, regulates banks and other financial institutions, the Ministry of Law regulates licensed moneylenders, okay? It's an important difference to bear in mind. Depending on where you're borrowing from, you'll want to check with the right regulatory body.

Jacqueline: But also, I think we want to remind everybody here: borrowing isn't shameful.

Don: Not at all.

Jacqueline: Not at all. You just always need to make sure that when you're doing it, you're intentional about it — taking care of your financial future, like how you would take care of your bike. So, another question. I'm going to throw it to you here, Don: ever felt like loans were controlling you instead of the other way around?

Don: Yes. Credit card loan, personal loan, renovation loan — all these different rates and dates. Well, that's where debt consolidation comes in: combining multiple debts into one loan.

Jacqueline: But once again, reminder: only do it through licensed lenders, banks, or MAS-regulated entities.

Don: So, are there other things we should look out for — or things CBS could advise on regarding debt consolidation? Maybe Laura?

Laura: Debt consolidation is a debt refinancing programme that offers the consumer the option to consolidate unsecured credit facilities, such as credit cards and some types of unsecured loans, across financial institutions with one participating financial institution.

Some of the benefits are: it offers lower interest rates; it combines multiple debts into one fixed monthly payment that is easier to manage; and it sets a fixed repayment period to allow consumers to track their progress. Regular payments can also help improve your credit score over time, and all other unsecured credit lines are suspended, reducing the risk of re-borrowing.

Jacqueline: So those are some of the benefits of debt consolidation. But there are some downsides as well, because often consolidation loans have longer terms.

Don: That's right. Because you may end up paying less each month, but you could end up paying more when you add everything up over the life of the loan.

Jacqueline: Very true. So, Laura, let me come back to you. How would one know whether debt consolidation is suitable for them?

Laura: If you are already struggling with multiple loans and your total unsecured outstanding balances have exceeded 12 times your monthly salary, you can consider applying for the debt consolidation plan. This plan is commonly offered by banks and financial institutions and involves combining all your existing debts into one single repayment account.

By doing so, it reduces the risk of incurring multiple high, late interest fees with different loan accounts. This plan also prevents you from missing out on several loan repayment due dates, and hence avoids unwanted additional penalties.

Jacqueline: That's very important, right? You don't want to incur any more penalties. But one important thing is this: consolidation isn't magic. It doesn't make your debt just disappear. It just reorganises it.

Don: So it's still there. You still need to change the habits that got you into debt in the first place, right? Otherwise, you might end up with a consolidated loan plus new debts on top — and you don't want that.

Jacqueline: One more question for you, Don. Today, I’m very bad, huh? I'm doing a bit of a Q&A with you. How are you doing with your debt? Was there a moment when you almost borrowed, but something told you: walk away, walk away?

Don: Oh, yes. I get WhatsApps all the time from people promising loans and easy money — fast cash, no paperwork. All these, like, “trust-me-bro” kind of vibes.

Jacqueline: Major red flag there — because no contract means no protection.

Don: Other warnings to look out for are excessive fees, the “offer only valid today” kind of pressure, or promises of instant approval.

Jacqueline: So what else should we look out for? Laura, perhaps you could let us know.

Laura: Some of the red flags of unsafe borrowing include: if they are not licensed or listed on the Ministry of Law's official website; if you receive cold calls, WhatsApp or SMS loan offers from unlicensed lenders; if they don't have a physical office and ask to meet in public places; or if they pressure you to take a loan very quickly.

Jacqueline: Walk away. Walk away. And if your friend is about to take out a loan with no contract, what would you say?

Don: Stop immediately. Look for alternatives first. You can delay some purchases, even borrow from family, with a clear plan. Trust your instincts. If something feels wrong, it probably is. There's no shame in walking away from a bad deal.

Don: Or, you know, we do have help out there. Contact Credit Counselling Singapore for budget help. They are free and legitimate. CCS is a non-profit organisation that helps people with debt problems. They can help you create a budget and even negotiate with your existing lenders.

Jacqueline: The service is free, and they're not trying to sell you anything. They're there to support you, to find solutions. Thank you so much again, Laura and Yee Hui, for spending time with us. As we wrap up, Yee Hui, could you give our listeners some key takeaways?

Yee Hui: For Credit Bureau Singapore, we always advise our consumers to spend within their financial means and strive to maintain a good credit reputation by practising responsible use of credit, and always aiming to leave positive records in their credit files. For instance, you can always pay your bills in full and on time before the due date, and consider a GIRO or other payment alternatives. Always avoid missing payments or defaulting on loans, as that can have an impact on your credit score. If there is a tendency to miss billing due dates, always consider limiting the number of credit accounts you have.

Don: All right, thanks for those tips, Yee Hui. And everyone, remember: if you're facing financial pressure, you are not alone. Many riders go through tough periods. You'll get access to a free credit report from Credit Bureau Singapore after this series.

Jacqueline: Whenever you're ready, you can start listening to our third episode, Saving and Investing for the Future.

Don: This has been episode two, where we cover Borrowing Wisely.