What You Need To Know About Debt Consolidation?

It is possible to consolidate your unsecured debts from many Singaporean banks into a single loan with one bank at a reduced interest rate under the country’s Debt Consolidation Plan. Basically, it’s taking out a loan with a low interest rate to pay off many higher-interest debts. You will only be responsible for one loan payment instead of numerous.

Additionally, you will be issued a revolving credit line with a limit equal to no more than one month’s salary, to be used for incidental purchases. Treat it like a savings account for unexpected expenses. If you use this credit to make a purchase, you will be adding to your current balance.

It might be difficult to maintain tabs on all of your financial obligations if you owe money to many institutions. It’s also a pain to maintain tabs on the varying rates of interest that each credit facility charges. Occasionally, you could even fall victim to forgetting to pay even the minimal amount due on one of your loans, which can lead to significant late payment interest rates.

If you are wondering can you get a personal loan without income proof, the Debt Consolidation Program was designed for just such a situation. The plan is designed to streamline the process of making payments by having you use just one account. This will provide you a more complete picture of your financial obligations. The reduced interest rates offered by a Debt Consolidation Plan are its primary advantage.

Debt Consolidation: A Good Option?

It is possible, but only at the price of some very difficult self-control. You are aware that your loan’s interest rate is calculated on the full unpaid principal amount. Having several lending facilities may put you in a debt trap from which it may be impossible to escape if you let the interest on your outstanding balances accumulate and the loan amounts keep growing. Debt consolidation plans, which often provide reduced interest rates, may be a big aid in reducing stress caused by overwhelming debt.

However, the following situations do not qualify for the Debt Consolidation Program:

• Loans for Remodelling
• Money for school
• Borrowing Money for Health Care
• Shared budgets
• Loans made available for commercial enterprises and their operations.

Debt Consolidation Program Eligibility: Who may apply for the Debt Consolidation Program in Singapore?

You must meet these requirements to participate in Singapore’s Debt Consolidation Plan:

• Existing as a Singaporean citizen or permanent resident;
• Have a yearly income of less than S$20,000 and personal assets of less than S$2 million; and
• Own more than 12 months’ worth of living expenses in interest-bearing unsecured debt across all credit cards and unsecured credit facilities with Singaporean financial institutions.

Keep in mind that you may only have 1 plan active at any one time. However, after three months, you will be able to refinance your present plan with another if you locate a more favorable package at another financial institution or loan company Singapore. The Debt Consolidation Plan is adaptable in this way.

To what extent does Singapore’s Debt Consolidation Plan help with financial difficulties?

You may minimise your interest rate by applying for a Debt Consolidation Plan at an approved bank, which involves the bank buying out your existing accounts at other banks and giving you a new loan at a lower rate.

The maximum loan amount available via a DCP varies from one financial institution to the next. If this is your first time applying for a debt consolidation loan, know that the bank will give you an extra 5% of the total approved Debt Consolidation Plan loan amount to cover any fees, interest, or charges that may have accrued between the time the loan is approved and the time it is disbursed to the banks from which you currently have debt. Your debt consolidation bank will return any unused portion of your allowance after paying off any new debt accrued during the consolidation period.

Does Credit Bureau Singapore take Debt Consolidation Plans into account when determining credit scores?

Your credit score will take a hit if you fail on your loan payments, especially if you owe money to many creditors and are chronically late with your repayments. When you have many bills to pay at once, this is a regular occurrence.

If you have many debts and want to enhance your credit score, a debt consolidation plan (which is simply another loan) may be the best option. In exchange, you pay back your plan in a timely manner. The lower your debt to credit ratio, the better your credit score will be.

Inasmuch as the DCP is classified as an unsecured credit instrument, the “Debt Consolidation” product code will be added to your credit file at the major credit reporting agencies. Like other credit products, a completed Debt Consolidation Plan will remain on your credit record for three years after the account is closed.

When it comes to debt, what are the upsides and benefits of a debt consolidation plan?

We have so far discovered that the Debt Consolidation Plan gives the following benefits:

• A consolidation loan is a loan from one financial institution that is used to pay off debt at other financial institutions.
• A cheaper interest rate compared to what the credit cards and other lending facilities are charging
• A revolving line of credit for helping with regular expenses
• A possible rise in your credit rating

Conclusion

There are provisions in every debt consolidation plan for when a borrower is unable to meet a monthly payment obligation. If you fail to make your regular monthly payment, you will be subject to the late payment fee and extra interest outlined in these conditions. If the bank determines that you can no longer afford to make your monthly payments under the terms of the Debt Consolidation Plan Singapore, it has the option to cancel the plan.