Consumer loans in Singapore.

• Main Authors: Chan, Kheng Min., Kong, Wai Sam., Tan, Saw Ching.
• Other Authors: Nanyang Business School
• Format: Final Year Project
• Language: English
• Published: 2013
• Subjects: DRNTU::Business
• Online Access: http://hdl.handle.net/10356/51203
• Institution: Nanyang Technological University

As early as a decade ago, the consumer debt level has been growing as a result of the growing affluence of consumers. The consistent economic growth of the nation has in a way, given the consumers confidence to spend and pursue their aspirations, such as owning cars and frequent overseas holidays. The consumer debt level has further ballooned and hit new records almost every year, especially where outstanding credit card debts are concerned. Consequently, in February 1995, the Monetary Authority of Singapore (MAS), decided to check this unhealthy trend by implementing two guidelines for banks and finance companies to follow when granting consumer loans : a) Unsecured loans can only be made to individuals earning not less than $30,000 per annum, and the loan quantum shall not exceed two months of the borrower's monthly income. b) The maximum loan duration for a car loan shall not exceed 7 years and the financing quantum not in excess of 70% of the value of the car, COE included. Through the survey, it was found that the majority of the consumers were actually aware of the new guidelines and some had indicated unhappiness and expressed reservations. Nevertheless, it appeared that few were willing to abandon their plans of car ownership despite the curb. In addition, they have also ways to overcome the restriction on unsecured loan amount. Another disturbing issue that was discovered was that a large proportion of consumers was unaware of the high interest chargeable on their outstanding credit card debt. This, coupled with the persistent increase in outstanding credit card debt does not augur well for the long term well being of the consumers. Thus, it is felt that educating the public on the effective interest rate is a task that requires immediate attention.