Ongoing Credit Checks and Requirements
Financial institutions are not allowed to grant further unsecured credit to an individual whose unsecured borrowings exceed the prevailing borrowing limit for 3 consecutive months. MAS is phasing in the borrowing limit between 2015 and 2019.
Borrowing Limit on Unsecured Credit
To help individuals to avoid taking on too much debt, MAS introduced limits on the aggregate amount of unsecured credit a borrower can receive across all financial institutions.
The limit is determined by comparing a borrower’s aggregate outstanding interest-bearing unsecured debt to their monthly income.
Borrowers cannot get additional credit facilities, and their existing facilities are suspended, when they exceed the following limits for 3 consecutive months:
|Borrowing limit||With effect from|
|24 times of monthly income||1 June 2015|
|18 times of monthly income||1 June 2017|
|12 times of monthly income||1 June 2019|
Calculating Aggregate Outstanding Debt
Aggregate outstanding debt refers to a borrower’s total debt across all financial institutions. When determining the borrowing limits for unsecured credit, only interest-bearing unsecured debt needs to be calculated. This includes:
- Outstanding amounts rolled over on credit cards (i.e. amounts charged to cards that are not repaid in full by the due date).
- Outstanding amounts on unsecured loans that accrue interest.
- Interest imposed on any other debt, e.g. on a late payment of an otherwise interest-free instalment plan.
When a Suspension Can Be Lifted
A suspension as a result of the borrowing limit can be lifted only after:
- The borrower reduces their debt below the prevailing limit.
- The FI has conducted fresh credit bureau and income checks on the borrower.
FIs have the additional discretion to lift the suspension and issue new facilities to consolidate and refinance the borrower's existing debts with other FIs.
FIs are also allowed to exceed the regulatory credit limits as part of such debt consolidation.
These concessions are to enable the borrower to benefit from refinancing debt at lower interest rates by consolidating their debt with one FI.