The standard of living in Singapore is way too demanding!
It’s not uncommon to find yourself stuck with a maxed-out credit limit, unpaid home loans, a personal loan looming overhead and maybe even an education loan.
To make things worse, some of these have ridiculously high interest rates, leaving you tearing your hair out trying to track all the interest charges.
What is a Debt Consolidation Loan?
Debt consolidation loan in Singapore are plans to help you save money and achieve a lower interest rate across all your loans.
They were introduced in 2017 to help Singaporeans and permanent residents who are struggling with multiple unsecured loans.
As with other financial obligations, you will need to pay your monthly repayments on time otherwise you will face penalties and fees. Legal action may also be imposed upon you, which may dampen your chances of applying for a DCP again.
Debt consolidation loan plans are a way for you to be savvier with your spending and help you manage your finances better.
How does Debt Consolidation Plan (DCP) work?
Here’s how it works. If you have multiple loans to repay, like high-interest credit cards, medical bills or loans, a DCP loan can combine them into one fixed monthly repayment.
A debt consolidation plan also provide a better effective interest rate (EIR) and longer loan tenures so that individuals can comfortably repay their loans, hence taking them out of the vicious cycle of financial burden.
It’s important to remember that your total outstanding balance remains the same, just your per annum effective interest rate (p.a eir).
Am I Eligible for a Debt Consolidation Loans in Singapore
According to the rules of the Debt Consolidation Plan, there are some criteria you will have to meet. You must be:
For example, if your loans are from credit cards, other unsecured credit facilities and reach at least 6x your monthly income, you are eligible for a DCP. If your loans are business or renovation loans, you are not eligible for the DCP.
If you meet all the criteria, you are eligible to apply for a DCP! It will definitely help you manage your finances better and make your life a lot easier.
Requirements for a Foreigner Loan Application
There are several mandatory documents all financial institutions and lenders have to adhere to before a debt consolidation plan can be approved.
- Singapore Citizen / Permanent Resident:
- Copy of NRIC (front and back) OR
- Copy of Passport (for Singapore Permanent Residents)
- Any of the following documents:
- Latest Utility bills (electricity, water, refuse collection), rates or tax bills
- Copy of Rental Agreements showing your address
- Latest Mobile phone statements / pay TV statements
- Letter from Employer stating current address
- Government issued documents stating address (e.g. IRAS, CPF, ICA)
- Past 6 months’ bank statements or credit card statements
- Latest credit bureau report
- Copy of latest Income Tax Notice of Assessment (2 years for Self-employed); or
- Copy of latest 1 month computerised payslip from current employer; or
- Copy of latest 12 month CPF Contribution Statement
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Best Debt Consolidation Loan Features and Benefits in Singapore
If you are struggling to keep up with your monthly payments for credit cards and loans, consolidating your bills in this way can certainly help alleviate financial stress. It can also make it less likely that you will fall behind on your payments and risk harming your credit.
For these reasons, getting a DCP application to consolidate higher interest loans (such as credit card loans) can often be very beneficial because you’ll end up with a lower interest rate per annum (p.a. eir).
How it works is that it eats less into your monthly income, giving you more breathing room for day-to-day spending.
A debt consolidation plan (DCP) is usually recommended only if you have reached your credit limit and your outstanding debt is more than 12 times your monthly income. For borrowers with a lower outstanding balance, getting another term loan or credit lines might be a better alternative.
You can check your credit score and other credit details from Credit Bureau Singapore’s website.
For more details about repayment plans, just fill out our online DCP application form with your contact details and our friendly loan advisors will give you a call to explain the details.
A debt consolidation plan is a great tool for people who have multiple financial liabilities with high-interest rates or monthly payments—especially for those who owe way more than they can handle. By negotiating a DCP, you can benefit from a single monthly payment in lieu of multiple payments, not to mention a lower interest rate.
And as long as you don’t incur any additional damage, you can also look forward to becoming debt-free sooner. Going through the DCP process can cut down calls or letters from your previous financial institution(s), provided the new loan is kept up to date.
Although the per annum interest rate (p.a eir) and monthly payment may be lower on a debt consolidation plan, it’s important to pay attention to the payment schedule. Longer payment schedules mean paying more in the long run.
If you are considering a debt consolidation plan, speak to your credit card issuer(s) or a licensed moneylender to get more details on how long it will take to pay off your total loan amount at their current interest rate and compare that to the potential new plans.
If it’s your first time applying, on top of adding up your outstanding debt + standard processing fee, you will also have to pay a minimal percentage (of the total DCP loan amount) on top of that.
That’s because in the time it takes to pay off those bills from your credit card bills or personal unsecured credit facilities on your behalf, your old accounts might have accrued even more interest and/or fees. The extra percentage charged to your debt consolidation loan account serves as a buffer for this purpose. But not to worry, the excess will be refunded back to your savings accounts.
Note: If you are considering refinancing your initial DCP amount with another financial institution, you can only do so at least 3 months after the approval of your latest DCP. It is also subject to any termination fee imposed by the original financial institution for early termination.