Debt Consolidation Plan: What is It & How Does It Work

Loan Agency Singapore (Main)

Introduction

Debt and loans have become an important part of the lives of people in Singapore. With this, a lot of Singaporeans are having problems ensuring that they pay off their debt and personal loan regularly. There is no shame in accepting the fact that we all need help in managing our debts. For people who have been having trouble paying off their debt from credit card charges or personal loan fees, there is a way to help you pay your debts easier. This mechanism is the so-called Debt Consolidation Plan. This article talks about this consolidation plan that could make the lives of people better and easier.

What is a Debt Consolidation Plan?

Debt Consolidation Plan, otherwise known as a DCP, refers to the process of combining together different unsecured loans into one larger loan, thereby giving the debtor better payoff terms. This consolidation plan particularly works for individuals who have multiple smaller loans and who are finding it difficult to pay off these debts. As a rule of thumb, DCP is for individuals who have an outstanding debt more than 12 times their monthly salary.

On many occasions, debtors owing a large sum of money fail to pay their monthly loan payments and fees. As a result, they find themselves drowning in debt and in a loan. Through Debt Consolidation Plans, debtors will be able to buy time in paying their debts and loan. Instead of paying off multiple debts in a month, they will only pay a single loan because all the debts have been consolidated.

Also, a Debt Consolidation Plan is meant for people who are being charged with a high interest rate by the multiple credit card companies and loan institutions they owe money from. Without a consolidation plan, these debtors are being charged with interest rates so high. In many cases, the monthly income of these debtors is not even enough to pay for these high interest rate debts. These individuals need help in paying the exorbitant loan fees.

A lot of Singaporeans apply for a DBC because their regular loan charges a higher interest rate compared to the interest rate of the DBC loan. Given this difference in the interest rate, people are somehow saving money with their DBC compared to the type of loan they have. Aside from the interest rate, DBC also offers a friendlier loan tenure. This means that people are given a longer period of time to pay for their loans.

To know more about Debt Consolidation Plans in Singapore, it is better to research more about the topic. You can visit financial sites to know more about the loan tenure of these credit facilities. Also, ask your own bank to know whether they have an existing debt consolidation policy in place. Check the terms and conditions that these banks offer in order to make sure that you are qualified for a Debt Consolidation Plan.

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How Does a Debt Consolidation Plan Work?

You might wonder how the Debt Consolidation Plan works. First, keep in mind that DCP is particularly helpful for individuals who are having difficulty paying off their personal loans and credit card charges. For example, you owe $10,000 to three credit cards with 25% p.a. eir. Each of these credit cards charges you $300 each month. This means that you have to pay a total of $900 of debt for each month in the next three years or so of your loan tenure.

When you have applied for a Debt Consolidation Plan, you can combine your debt to these three credit cards into one debt. You will be charged a monthly payment of $500 per month, which you will pay for the next five years of your loan tenure. This arrangement buys you more time to save as you are basically extending your loan tenure. You are basically extending your loan tenure, which means that you can use your money for your other pressing needs.

Moreover, the effective interest rate of debt consolidation plans is lower than the effective interest rate of credit card companies. The trick here is to compare the interest rates as well as the terms and conditions set by financial institutions in order to make sure that you have the best Debt Consolidation Plan. You can also try to look for financial institutions that waive DCP processing fee.

DCP does not only benefit debtors. This arrangement also gives assurance to credit facilities that they collect their payments. Debt Consolidation Plans somehow make sure that debtors are capable of paying off their debts instead of just running away from them. Unsecured loans have higher interest rates compared to secured loans. Hence, it is important for the government and the credit facilities to alleviate the difficulty of debtors in paying their unsecured credit.

Consolidated debt is beneficial for everyone in the financial market. It provides lower interest rates. Also, it ensures that your monthly income is sufficient for you and your family’s needs. An unpaid personal loan and unsecured credit could hurt the economy. Consolidate debt so you can contribute to making the economy of Singapore more stable.

How Much Can You Borrow from a Debt Consolidation Plan?

When you apply for a Debt Consolidation Plan, your debt is not paid or erased. It just means that your debt is spread in a longer period of time and at times. Also, you are given a lower interest rate compared to the interest rate from your non-DCP loans. When you apply for a Debt Consolidation Plan in banks, they will give you a DCP amount equivalent to the outstanding balance you owe. In cases where the DCP amount approved by your bank is not enough to pay your outstanding loans, you will have to balance and pay directly to the credit facilities where you owe the money.

In some cases, banks can provide debtors with a 5% allowance on top of the DCP amount. This allowance will be paid directly to the credit facilities where the debtor owes the money. Banks also waive the DCP processing fee. You can also negotiate with them about the loan tenure that works for you best. It is important to research whether your bank has this kind of deal.

Also, a Debt Consolidation Plan does not mean that you are acquiring new debt. It just means collating together the debts that you already have. To know the exact amount you are borrowing, contact banks, so you know the exact interest rate that comes along your Debt Consolidation Plan. Also, these banks apply different fees for their DBC. It’s better to ask them these loan details so you may nee the fees you are being charged with.

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Who Qualifies for a Debt Consolidation Plan in Singapore?

Debt Consolidation Plan in Singapore is a government-approved program meant to combine unsecured credit and loans. This means that secured loans are not covered in this plan. DBC is essential, especially at times of financial crises, because it helps Singaporeans deal with their debt problems. It is important to remember, though, that not everyone can apply for a Debt Consolidation Plan. In order to apply for a DCP, you must qualify for these requirements.

First, you must be a Singapore Citizen or a Permanent Resident. Only those with either of these statuses are allowed to apply for a Debt Consolidation Plan.

Second, you must be an employee earning between $20,000 and $120,000 a year, or the total of your personal asset should not exceed $2 million. If you are earning higher than this or own a high amount of personal assets, DBC might not be the best option for you.

Third, the total of your interest-bearing unsecured credit on all of your credit cards and other loans from unsecured credit facilities should be more than 12 times your monthly income. Debt Consolidation Plan is only applicable to unsecured credit and loans. This includes loans where a debtor did not present collateral when he/she applied for a loan.

Be sure that you qualify for these requirements before applying for a Debt Consolidation Plan. You can consult your banks or the credit facilities you trust to check whether you are eligible for debt consolidation. Also, you can do preliminary research online to help you better understand these requirements. Try to find a reasonable loan tenure under your Debt Consolidation Plan so that you have enough time to save for your fees and other charges.

Where Can I Get a Debt Consolidation Plan in Singapore?

When you are sure that you are eligible for a Debt Consolidation Plan, you can go to certain financial institutions in the country that could help you. Just submit your application to them alongside the processing fee (or in some banks, the processing fee is waived). Afterward, wait for their decision to know that your application is approved.

Currently, Debt Consolidation Plans are available to 14 participating financial institutions (FI) in Singapore. These FIs are the following: American Express International, Inc., Bank of China Limited Singapore, CIMB Bank Berhad, Citibank Singapore Limited, DBS Bank Ltd., Diners Club Pte Ltd., HL Bank, HSBC Bank (Singapore) Limited, Industrial and Commercial Bank of China Limited, Maybank Singapore Limited, Oversea-Chinese Banking Corporation Limited, RHB Bank Berhad, Standard Chartered Bank (Singapore) Limited, and United Overseas Bank Limited.

These financial institutions are helpful for those looking for a Debt Consolidation Plan. Some of them would waive the processing fee of your application. It is best to approach them in order to know the exact p.a. eir charges and interest rate fees. These banks have different policies, which means you have to find the one plan that fits your needs.

For some, applying for a Debt Consolidation Plan can be scary. Debts consolidation may seem like a complicated process. There are too many details to understand and follow. If you are having difficulty absorbing all the information written above, it is better to consult experts who could help you. Try comparing different consolidation plans on the Loan Advisor website before choosing which plan works best for you. They can also help you find the FI, which has the least interest rate.

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Things to Remember Before Getting a Debt Consolidation Plan

The first thing in solving your debt and loan problems is to accept that you need help in managing them. It is true that the increasing interest rate of our loans are making it hard for us to pay them. Debt consolidation is one helpful way for you to be able to pay off your loan. Without learning how to manage your personal loan unsecured credit and other types of debt, the fees you are paying will continue to increase. Consolidate your debt as soon as you can in order for your begin making your financial life easier.

Without a Debt Consolidation Plan, a lot of Singaporeans are charged with high fees and interest rates by credit facilities. Their monthly income is simply not enough to pay for the unsecured credit they made in the past. Also, the loan tenure they are given by the credit companies is too short. As a result, they are missing payments to their personal loan and credit card charges.

There are small differences when it comes to a debt consolidation plan. For example, p.a. eir rates are different. Hence, it is better to talk to representatives of any financial institutions (FIs) mentioned above to make sure that you are getting the lowest p.a. eir and fees when it comes to paying off your loan. These FIs will be more than willing to guide and to inform you which loan consolidation plan has the lowest interest rate.

Another way to prepare before applying for a DCP is to consult websites that are knowledgeable ton the topics of loan, fees, credit cards, a personal loan, interest rate, and other financial topics. 365 Credit Solutions is one great website that has so many materials in helping you select the best consolidation plan. They can also teach you information about your other loan questions and clarifications.

About 365 Credit Solutions

365 Credit Solutions Pte Ltd is an established licensed moneylender since 2010 (formerly known as FLS Credit and Fu Lu Shou Credit), accredited by the Registry of Moneylenders in Singapore. We specialize in providing personal, payday, bridging, foreigner, business loans to Singaporeans & Foreigners working in Singapore.

 

Our mission is to help make taking a loan a simpler, more understandable process, and to educate our customers about their loan options in the event of an urgent need.

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