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Reasons Why Sustainable Borrowing Is Better Than Having No Debt

The idea of being completely debt-free holds a strong allure. However, in the context of Singapore’s living and lifestyle, completely avoiding debt might not always be the most beneficial strategy. While prudence is crucial, sustainable borrowing can be valuable for achieving life goals and building long-term wealth, especially in Singapore.

What Is Sustainable Borrowing?

Sustainable borrowing refers to taking on debt that you can comfortably repay within your financial means. It involves several key factors:

  • Loan Size: Your existing income and future earning potential should be able to handle and manage the amount you’re borrowing, regardless if it’s from banks, instant money lenders, or family and friends.
  • Repayment Term: Choose a repayment term that aligns with your financial goals and avoids excessive strain on your budget.
  • Interest Rate: Look for loans with competitive interest rates that minimize the overall cost of borrowing. Plenty of reputable lenders offer very manageable loan packages. You just have to shop around for the right lender and perform due diligence.
  • Debt-to-Income Ratio (DTI): Maintaining a healthy DTI (ideally below 35% in Singapore) ensures you have enough income to cover monthly expenses and debt repayments.

Benefits of Sustainable Borrowing

As already mentioned, borrowing isn’t exactly a bad thing. In fact, sometimes borrowing a substantial—yet sustainable—amount can prove to be quite advantageous:

Financing Life Goals

Owning a home, starting a business, or pursuing higher education are often significant financial milestones. Sustainable borrowing can bridge the gap between your current savings and the capital needed to achieve these goals. In Singapore, the Central Provident Fund (CPF) offers various schemes to help citizens finance housing purchases, which are considered a form of sustainable borrowing.

Building Wealth

The strategic use of debt can be a powerful tool for wealth creation. Investing in appreciating assets, like real estate or well-managed businesses, can generate returns that outpace borrowing costs, leading to long-term wealth accumulation.

Improving Credit Score

Responsible borrowing and timely repayments can positively impact your credit score, making it easier and cheaper to access credit in the future. This is beneficial for securing loans for larger purchases or business ventures down the road.

Tax Advantages

In some instances, interest payments on certain types of debt, such as mortgages, can be tax-deductible. This can lead to potential tax savings, further improving affordability.

When Is Borrowing Ideal?

While sustainable borrowing can be beneficial, it’s crucial to approach it with caution and only in specific scenarios:

Financing Appreciating Assets

Borrowing for investments with the potential for long-term value growth, like real estate or well-researched businesses, can be a strategic decision.

Investing in Yourself

Education loans for in-demand skills or qualifications can significantly increase earning potential, making them a sensible and worthwhile investment.


Unexpected events like medical emergencies or car breakdowns can be financially overwhelming. When unavoidable, you can look for trusted lenders, like Goldstar Credit, for loan packages with affordable rates. They can provide a safety net in such situations.

Important Things to Consider

Borrowing should never be done on a whim. It should be approached with prudence and strategy, exercising wisdom and discernment at all times. Doing this will help you avoid excessive borrowing that leads to financial —and sometimes, mental—stress. To avoid it, here are a few things you need to consider before making a decision:

  • Thorough Research: Before taking on any debt, carefully research different loan options, compare interest rates, and understand the full repayment terms. If things are confusing for you, ask questions and seek advice. 
  • Financial Planning: Develop a realistic budget that factors in your income, necessary expenses, and potential debt repayments. Ensure you have a clear plan to manage the additional financial obligations.
  • Discipline and Responsibility: Sticking to the repayment plan and avoiding impulsive borrowing is crucial to ensure the debt remains sustainable.

Wrapping It Up

Sustainable borrowing, when approached responsibly and strategically, can be a valuable tool in achieving your financial goals within the Singaporean context. However, it’s essential to prioritize financial prudence, conduct thorough research, and prioritize debt repayment to ensure it remains a tool for advancement, not a burden on your future. 

The decision to borrow should be based on individual circumstances and long-term financial aspirations. Consulting a qualified financial advisor can offer valuable guidance and personalized recommendations for navigating the world of debt and financial planning in Singapore.

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