Introduced in 2013, the Total Debt Servicing Ratio (TDSR) was intended to “strengthen credit underwriting practices by financials institutions”, and to “encourage financial prudence among borrowers”. In other words, to stop banks handing out cash like candy, and to make it less likely for borrowers to make risky speculative investments.
Businesses take loans for various reasons and they come from various sources, each with its own stipulations and pros and cons. Short-term business loans, for example, provide business owners with a flow of fast cash in order to handle emergencies, bridge cash-flow gaps, to fund a new project, explore a business opportunity, and so on.
Credit and debt are a powerful tool to meet our materialistic goals. They allow us to buy our dream homes, luxury vehicles, exotic vacations and so on. Buying a new kitchen or a living room set is as simple as financing the purchase at 0% interest for 12 to 36 months.
Homeowners use refinancing to pay off their existing mortgage with a new loan, which usually has a lower interest rate. In general, such loan schedules are beneficial, when:
Short-term loans essentially work the same as medium- and long-term loans, with the only difference being a shorter repayment period, which is usually within one year. Though some lenders view a period of less than two years also as short-term.
Simply put, TDSR – or Total Debt Servicing Ratio – which was introduced by the Monetary Authority of Singapore in June 2013, limits the amount that home owners can borrow in Singapore. It is a way for the Singaporean government to safeguard borrowers from over-borrowing in the city-state, by providing banks (or other lenders) with a robust basis and standardised approach for assessing the debt serviceability of borrowers.
In our society, there’s a pervasive myth that any debt is always a “bad debt”. Whenever we talk about taking out a loan, or owing someone money, it’s almost always viewed negatively these days. But for small businesses, the truth about debt is far less clearly defined.
What is a Bridge Loan? In simplest terms, a Bridge Loan is a type of gap financing arrangement wherein the borrower can get access to short-term loans for meeting short-term liquidity requirements. It is often used to meet current obligations, while permanent financing is being secured.