Things to Remember When Making a Sustainable Borrowing Plan

The Singapore lifestyle is an exciting one. However, living in the Lion City isn’t exactly cheap. It will cost you a pretty penny. Making ends meet can sometimes be challenging, which is why folks resort to borrowing money. 

Before you go diving headfirst into loan applications, you need to have a battle plan. This is where a sustainable borrowing plan comes into play. 

Why Do People Borrow Money in Singapore?

Singapore has a very vibrant lifestyle that may take a toll on one’s finances. Folks borrow money from banks and money lenders for various reasons, including: 


Investing in yourself is a valid reason to take out a loan. And education is one of the best ways to invest in yourself. However, the cost of education in Singapore is quite high, which makes managing tuition fees a bit challenging. 


Owning a home is a dream of every person, especially in Singapore. Whether it’s a condo loan or an HDB downpayment, you need to have a solid mortgage management plan. 

Car Purchase

Although Singapore has an excellent public transport system, many residents still desire to own a car. From COEs to monthly loan repayments, you need to have a strategy in place for car ownership.  

Business and Investment

Launching a business or taking advantage of investment opportunities in SG needs significant capital. Borrowing may open doors but you need to be strategic about it.

Medical Expenses

Sometimes life throws curve balls our way. Medical emergencies are one of them. They may be unexpected but they should never derail your finances. Borrowing money helps bridge the gap and gives you some momentary relief. 

Debt Consolidation

Consolidating your debt into a single loan helps simplify your finances. This makes debt management a lot easier for borrowers. 

Building a Sustainable Borrowing Plan: 7 Practical Steps to Take

Now that we know the different reasons folks borrow money in Singapore, let’s talk about some helpful steps you can take to build a sustainable borrowing plan: 

1. Know Your Numbers

Find out and list down your actual monthly income and expenses to give you a better idea of what you could face. This should include your CPF contributions. Knowing your numbers lets you understand how much you can borrow realistically. 

2. Determine Your Debt-to-Income Ratio

A debt-to-income ratio shows you the amount of your debt versus how much you make. Singapore has a healthy DTI ratio of 35% and below.

3. Build an Emergency Fund

Finance experts emphasize the importance of building an emergency fund so you are prepared for the unexpected. Medical emergencies, housing repairs, and unemployment are just some of the things that emergency funds can help you with. 

4. Shop Around

When borrowing money, never pounce on the first deal that you find. You have to do your due diligence. Look for other options so you can compare interest rates, repayment periods, and hidden charges from different banks and lenders. Doing this leads to wiser borrowing decisions.

5. Read the Fine Print

This step is imperative. It is crucial to understand each and every clause of the loan agreement. This includes interest rates, repayment terms, penalties, and other similar items. 

6. Set a Realistic Budget

When creating a realistic monthly budget, add the projected monthly loan payments to your existing expenses. Make debt repayment a top priority. 

7. Boost Your Income

Whether you decide to borrow money or not, adding to your income source is always a good thing. Doing this gives you enough elbow room for unexpected expenses or add to your emergency funds or savings account. It can also ease the burden of your monthly expenses, including loan repayments. 

Wrapping It Up

Borrowing money can be a very powerful ally in life in Singapore. The key is coming up with a sustainable borrowing plan and sticking to it. You need to be responsible with it so debt management won’t be a burden. A good borrowing strategy will help you achieve your goals without compromising your financial well-being. 

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