Tan Kin Lian's Blog: Relief loans to repay credit card debts

Thursday, November 20, 2008

Relief loans to repay credit card debts

Many people expect the next big financial crisis to be triggered by the failure of the credit card debts.

I hope that action can be taken to minimise the impact of this impending crisis. I believe that a large number of people borrowed on credit cards due to reduction or loss of their earnings. The high interest rate on the credit cards add to their burden.

I suggest that a relief loan be provided to these people who have runned up the credit card debts for this reason. This relief loan can help them to reduce their heavy debts. My proposal for this relief loan is set out below:

http://tankinlian.blogspot.com/2008/11/relief-loans-to-replace-loss-of.html

I suggest that the banks should give a discount on the repayment of the credit card debts through the relief loan. As they have earned a high rate of interest before, they should take a reduction in return for the repayment of the loan.

I also hope that a limited amount of relief loan be given to other borrowers who have incurred a credit card debt for other reasons, e.g. over-spending.

The relief loan, charged at a modest rate of interest, will give the borrower a better chance to repay the borrowings, and prevent another round of financial crisis.

This targeted approach is better than giving every person a cheque under a stimulus package (as was practiced recently in USA).

12 comments:

Anonymous said...: Your approach is to keep the goose alive. This is the long-term view.

Their approach is to kill the goose and roast it. This is the short-term view.

Your view and both humane and profitable.

Their view is both pragmatic and maximizes profits (for the current CEO).; November 20, 2008 9:56 PM
Anonymous said...: Banks may have no time for these ideas as it is troublesome and the benefit is minimal to them. The most you can expect is a restructuring of repayment or failing that, bankruptcy to the borrower. This has been the practice for many years and during boom and bust times.

Anyway some people even view bankruptcy as no big deal. That's why they will spend and spend without 2nd thought.; November 20, 2008 10:51 PM
Anonymous said...: I think banks are legalise loansharks. Come on, 24% interest! Imagine compounding 24% interest, it will accumulate very fast. I wonder who approve such a high interest. Anyway, the banks are looking for trouble themselves. Why give easy credit especially to those who cannot afford to pay? I think it is just another sub-prime crisis waiting to happen.Sometimes I think banking is a business with no conscious. They are out to make profit at the expense of people.; November 20, 2008 11:41 PM
Anonymous said...: Perhaps you might be interested in the view of our minister at http://www.p65.sg/ on Lehman or Layman Woes.; November 20, 2008 11:53 PM
Anonymous said...: in that case, those who holding multiple cards, go to the counter, just cut into two and cancel it.

Just keep one with the minimum credit limit.

Use cash.

Cos the lesser the people in the country uses FUTURE EARN money the lesser bankers can play with selling yet another credit, which is a hunded of billions. Everyday, they ask you to spend and free Toasters...why?

Chances of banker earn 18% on O/s balance is 60%,
Chances of VISA/MASTER.earning 1..2% from transaction is 100%.
Merchant pays for goods sold, which could already marked up to include card fee.

Use cash. Cash flowing in the economic help the growth.

Electonic money...debit card..ya ya..what u say?

would you enjoy everyday counting all your cash in your wallet, pockets?
Or sorting out credit card chits and month end statement?

I had just cancel one of my Gold card...; November 21, 2008 12:12 AM
Anonymous said...: I do not agree with this view at all. People should learn to be responsible for their own actions. One of the way for them to learn is through pain. If there is always an easy way out, they will never learn!
Once again, it is about personal responsibility; November 21, 2008 12:21 AM
adego said...: there are enough good advise, however, very few take heed of sound counsel.

How did credit card company make money, while they openly declare they are loan sharks, charging 24%p.a.?

nobody force the cardholders to roll over their credits!
while some may have the will to pay, many just let it roll over, due to poor money management.

It's the human weakness of handling credits - the card company has done their sum, that's why the huge 'bad debt' is just a piece of cake, they will continue to make money, and credit card biz and its 'bad debt' is unlikely to create any credit crisis.; November 21, 2008 12:48 AM
Anonymous said...: perhaps it would be better to offer relief to jobless who cannot meet their debt obligations by allowing them to "borrow" from their own CPF accounts instead

much like buying a house, you can take money out of CPF, but once you get a job, some money will have to go back to 'repay'/top up your CPF

this might be a better solution as no interest needs to be charged. borrower is 'borrowing' from his own retirement funds, but as with buying a house or taking out study loan with CPF, this money will be repaid

lastly, this should only be a facility for jobless people. those who have been irresponsible with spending need to learn a hard lesson; unless proven that they suffered an UNFORESEEN drop in income that cause them to be debt (something like a big pay cut instead of a job loss) then they can be considered applicable; November 21, 2008 2:28 AM
Anonymous said...: i have used credit cards for more than 30 years now and between my wife and i, we have 12 cards but we never use the credit extended. we use the cards in 2 ways. one as a mode of payment instead of cash for convenience and security and the other to get discount by merchants like food outlets. we never spent just because there is a card promotion. we will spent because we wanted to and the cards are just a mode of payment. the balaces are settled monthly.; November 21, 2008 7:33 AM
Everlearning said...: I never take up a credit card and always decline such offer from the banks. I don't like the idea that what I spend is not my money.

It has proven that credit borrowing is detrimental to our human race. Not everyone is as wise and prudent, like 7:33AM.

Statistics have shown that bad debts are on the rise. I don't wish to see that Singaporeans would end up the same fate like the Americans.; November 21, 2008 9:19 AM
Anonymous said...: VISA and MASTER is collecting business transaction all over the world and sell the informations.
they are also monitoring the spending pattern, beside making a fee...

Trillion change hand between merchant-banks- holders...just count on a small fee 0f 0.5% is enough to buy a Private Jet.; November 21, 2008 2:04 PM
Anonymous said...: great idea for this one :) In the US, if the Feds can get it out, credit card companies will soon have a hard time jacking up the interest rates on credit card debt... until then, relief loans should be looked at and studied.; December 16, 2008 1:52 AM