3 Ways MAS’ SFRP Can Help You Manage Your Cash Flow Problem

Be it whether you are retrenched, asked to take a pay cut or forced to go on unpaid leave, the reality is that some of us might be facing some cash flow problem in the near future because of the Covid-19 and the corresponding circuit breaker measures.

To help us manage our cash flow and still continue to meet our financial obligations like loan repayments and insurance premiums, the Monetary Authority of Singapore (MAS) rolled out the Special Financial Relief Programme (SFRP) with banks and insurers in Singapore. Here’re three things you need to know about the SFRP and how it can help you.

  1. Defer Your Home Loan, If You Need To

For any homeowner out there, this one’s for you to help you manage your huge financial commitment of a residential home loan.

Under the SFRP, homeowners are allowed to request for deferment of your home loan repayment for up to 31st December 2020. You can either choose to:

  1. Defer the principal portion of the monthly instalment; or
  2. Defer the full monthly instalment

For option 1, you will only pay for the interest rate charged on your principal loan amount. Under option 2, you won’t have to pay a single cent till 31st December 2020.

In addition, you can also choose to extend the duration of your mortgage by up to the number of months you chose to defer your mortgage repayment (i.e. up to 6 months). This will help you lower the monthly instalment once the regular mortgage repayment resumes.

What’s The Catch?

However, there’s a catch to this. During the period of deferment, you will still be charged interest on the principal loan amount of your residential. In the long run, you will end up paying more interest on your housing loan.

  1. Turn Your Unsecured Loan Into A Term Loan With Lower Interest

Unsecured loan from credit cards are high-interest credit facilities that can make your debt snowball if you do not have the cash flow to pay for the monthly maintenance. That’s why MAS is letting Singaporeans or PRs who has lost at least 25% of your income (after 1st February 2020) to convert your unsecured loan into a term loan.

The conversion will reduce your effective interest rate from 26% to a mere 8% with fixed monthly repayment schedule for up to 5 years. By converting to a loan with lower interest rate, you can effectively reduce your debt burden.

What’s The Catch?

Well, the biggest catch to this is that it isn’t for everyone. Besides having to be a Singaporean/PR, you have to fulfil the following criteria:

  • Lost at least 25% of your income after 1st February 2020
  • Between 30 to 90 days past due on your existing unsecured debt with the bank or card issuer
  • Can’t be on any existing debt repayment or restructuring programmes with the bank
  1. Postpone Your Insurance Premiums While Still Staying Covered

This is perhaps the best deal among the SFRP measures that MAS introduced.

If you are currently paying for any life or health insurance policies, you will be eligible to postpone your insurance premiums for premiums up to 30th September 2020 for a maximum period of 6 months. The best part is that your coverage under the policy continues to be effective even as you take a “premium holiday”.

For general insurance (e.g. car insurance, home insurance), you can apply to your insurer to convert the annual insurance premium into monthly instalments.

What’s The Catch?

Take note this is a deferment not an exemption, and of course..here are some general criteria one have to satisfy before getting deferment approved

(a) Lost their jobs due to COVID-19;
(b) Experience a sustained income drop of 30% or more for 3 consecutive months (such as for small business owners, private hire drivers, etc);
(c) Put on indefinite/extended no-pay leave (such as for airline staff, entertainment venue staff, etc); and/or
(d) Are hospitalised due to COVID-19 and/or are paying for COVID-19 related hospitalisation bills for immediate family members. This is provided the hospitalised patient has not travelled out of Singapore since 27 March 2020.
When In Doubt, Get An Independent Expert Opinion

Although the MAS has given you the options to defer your financial obligations, these are really meant for those who need it. That’s why we recommend treating these options as a last resort.

If you are considering taking up any of the SFRP measures, make sure to have a quick chat with your bank or insurer to understand what are the options available to you. There might be a better deal for you to manage your cash flow problem. Alternatively, you can also get an independent opinion from the Moneyline.sg team to explore which is the best option for you.

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