With the onset of various economic issues that have affected Singapore’s financial operations, a high percentage of businesses have gone under recession. This is after the economy contracted sharply when the Covid-19 global disaster hit the market in quarter 1 of 2020.
This has been an unfortunate event that has rendered many organizations cut down on their costs, and the same has negatively impacted individuals. Some have lost their jobs; others have experienced pay cuts, whereas others have had their wages frozen because there is no apparent certainty of the future.
However, amidst all these challenges, the MAS and other associations in Singapore implemented measures that are meant to support individuals and ease their financial burden by reducing their short-term repayment obligations in terms of loan repayments, mortgages, and any unsecured credits.
These are meant to help more residents in Singapore manage their financial status even as they look forward to a positive impact of the economy in the near future.
To achieve this, there are a number of measures that have been instituted, and below is an analysis of some of them, which will eventually lead to easing one’s cash flow and the debt that’s already running.
1. Deferring loan repayment
These measures are instituted into three main groups, which are basically Residential property loans, Renovations and Student loans, and Commercial and Industrial Property loans. This is an agreed period by which a borrower does not have to pay the loan, either the principal or interest.
Once the deferment period is over, the individual is debited with the interest.
In this case, financial institutions, including Singapore licensed Moneylenders.
The individual is given an option to either defer principal alone or defer both principal and interest until 31 December 2020.
However, it’s worth noting that interest will only accrue based on the deferred amount and not the full loan.
Particularly, MAS has joined hands with banks and moneylenders to ensure that Landlords affected by the Covid-19 amendment Bill are incorporated in the plan. It was agreed that individual landlords who have their current repayment loans as at 1st February 2020 are allowed to defer their repayment until 31 December 2020.
They are therefore required to submit their tenant’s rental waiver or rescheduled payment list.
Interest will accrue on the deferred amounts for those who will be eligible for this measure upon approval.
2. Low-Interest rate
This mostly applies to the personal unsecured credit, where financial institutions are lowering the interest rate, which is capped at 8%. The repayment period limit is set to a maximum of 5 years.
The lowered interest is approved under the Special Financial Relief Programme and applicable to cover for such debt as unsecured debt from credit cards, revolving credit cards.
These are basically cards issued by credit card companies and banks inclusive.
The individual is required to make an application to the lender and convert their outstanding loan balances and reduce the interest rate and term before 31st December 2020. But then the eligibility for the lower interest measure is only applicable to those who have suffered a loss of 25% or more of their monthly revenue that can be justified taking place after1st February 2020.
3. Extension of Loan repayment
The fact that the economy has done poorly in the past two quarters of 2020, debt consolidation is one of the measures that will give the borrowers financial relief as the economy picks once more.
On the same note, the borrower should apply for an extension with the lender to a maximum of five years.
4. Refinancing loans in a more flexible manner
The financial institutions have also been subjected to an easier refinancing such that investment and property loans are repriced to a more accommodative value. On the same note, they have been urged to reprice the debt without subjecting them to the total debt servicing ratio.
This is to enable the borrowers to work in a more friendly environment and avoid falling into default. By so doing, they will continue repaying the loans, and the portfolio at risk will not be realized during the recession period.
5. Prorated Insurance premiums for General Insurance Policy Holders
While general insurance pays lump sum premiums, the instituted measures are meant to offer flexible premiums to those holders of policies such as the Personal motor Insurance policies, travel insurance policies, foreign domestic insurance policies, among others.
With the lower premiums payment monthly, the policyholders are allowed to pay their premiums while enjoying their financial freedom while covering the period under which the policy is subjected to.
6. Life and Health Insurance Premiums payment extension.
Life and Health Insurance can be deferred for up to six months for those individuals holding a life policy whose renewal date falls due between 1st April and 30th September 2020. But the insurer must approve for such a postponement before it takes effect.
With the Mas Financial Measures in 2020. The good part of deferring life and health insurance comes in that there is no expectation of paying more on interest as it is when it comes to loan deferment.
This will enable individuals to retain their policy and manage their cashflows rather than reduce their protection or change it to a paid-up one.
But then, the policyholders must make sure that the premium is ready by the end of the deferment period to avoid the chances of losing it altogether.
7. Reduction or complete waiver of Retail Bank Account Fees
There are those individuals who have not been able to meet their monthly threshold for the accounts they hold with the financial institutions since the global crisis hit the economy. MAS Measures are that individuals are at liberty to apply for a waiver of such fees until 31st December 2020 after one gives sufficient proof to the financial institutions that their income was affected as from 1st February 2020 Covid-19 pandemic.
These measures were brought into being to ease the financial challenges faced by individuals during these tough economic times to offer flexibility and manage cash flows effectively even as the recession comes to an end.