There are many of us living in Singapore that may find ourselves struggling to keep up with the cost of living or a particular lifestyle. Unfortunately, many may turn to credit cards, personal loans, or engaging moneylenders to sustain their livelihoods. More often than not, this can lead to accrued debt. Dealing with debt from multiple sources can be daunting, especially when managing the different, growing interest rates and payment schedules. 

Debt Consolidation Plan (DCP) in Singapore can offer a structured approach to help streamline your debt into a single, affordable payment. In this Debtox guide, we aim to provide a comprehensive overview of DCP, including its advantages and disadvantages, your eligibility criteria, and the application process.

What Is Debt Consolidation Plan In Singapore?

Debt Consolidation Plan allows you to combine multiple unsecured sources of debt, such as your credit cards and personal loans, into a single loan which will be paid back through a single fixed monthly repayment. 

Allowing debtors to consolidate their debt, providing the benefit of a single, lowered interest rate. This often simplifies an individual’s journey to financial freedom and debt repayment. 

It is important to note that Debt Consolidation Plans in Singapore do not cover any loans taken from moneylenders or other unsecured debt, meaning that interest is still incurred from debt accrued from these sources. 

What Are Some Benefits Of Debt Consolidation Plan In Singapore? 

As mentioned above, the primary benefit of DCP in Singapore is that an individual’s multiple repayments from multiple banks are combined, meaning two things. These are that the debtor now only has to focus on a single monthly payment, and therefore a lowered interest rate compared to the cumulative rates of multiple repayments. 

Additionally, consolidating your debt also means that you are less likely to miss a payment and face the risk of needing to make late payment fees. Individuals are likely to find themselves feeling more financially organised and in control when only needing to focus on a single payment. 

Another benefit of choosing to enter Debt Consolidation Scheme is that DCP may provide an extended repayment period through a longer repayment tenure. This eases the monthly burden faced by debtors when trying to repay their creditors. 

Successfully entering and managing DCP can also have a positive impact on an individual’s credit score as it indicates financial responsibility to creditors moving forward. As long as you are sure to keep to your monthly repayments for the given tenure period, completing DCP will not have a negative effect on your credit score. 

Do note that the same bank that issues DCP will typically provide you with a credit card. While this may sound like a tempting offer - it can often lead individuals to accrue more debt over time as opposed to helping them bring down their total and achieve freedom from debt. 

What Is The Eligibility Criteria For Debt Consolidation Plan In Singapore?

Some requirements for eligibility for DCP in Singapore are that the individual must be a Singaporean Citizen or Permanent Resident, their maximum annual income cannot exceed 120K annually, they must have a good credit standing (a history of late payments may bring about challenges). 

Additionally, the existing unsecured debt accrued by the debtor must be at least 12 times their current gross monthly income. 

At Debtox, we understand that some of these terms may make it difficult for individuals to decide which repayment scheme is right for their situation. Schedule a consultation with our Debt Consultants who can help you decide which scheme works best for you. 

We would like to highlight that exempted unsecured loans, such as renovation and study loans, are excluded from DCP in Singapore. 

How Do I Apply For Debt Consolidation Plan In Singapore?

Review your eligibility criteria to ensure that you first meet the requirements. You may then look for a bank that offers DCP in Singapore. However, as mentioned, should you find the criteria confusing or worry that you do not meet all points - you can opt to schedule an appointment with one of our Debt Consultants to better understand your available options. 

Should you meet all requirements, you may choose to complete an application form online and submit the necessary documents. These may include your identification documents, proof of income, and any existing debt statements. 

Your application will then be reviewed and assessed by your selected DCP provider. Once your application has been approved, you will receive a proposed consolidation plan. The next step is for you to accept the terms, at which point, you will make payments to your DCP provider, who will disburse the consolidated amount to clear your various debts.

What Are Some Considerations Before Entering Debt Consolidation Plan In Singapore?

There are various banks that offer Debt Consolidation Plans, before deciding on one, we recommend that you compare your option and the terms of each. It is important to pay close attention to the differences between interest rates and repayment terms before committing to a financial institution and plan. We would also like to highlight that an extended repayment period may also result in a higher interest total being repaid. 

During your repayment period, it is advisable that you budget wisely during this period to ensure that you are able to make your monthly repayments. You should also be careful not to accumulate new debt during this time as it can make it more difficult to focus on your DCP repayments. (Touch on credit card given by DCP provider)

As mentioned earlier, the bank you choose to go into DCP with will provide you with a credit card. It can be easy to find yourself relying on that credit card more than you should and accruing more debt. Instead, it is important that you find ways to live within your means while working to pay off your existing debt. Your goal should be to attain freedom from debt before beginning to work on saving and building yourself up financially. 

In Conclusion…

Debt Consolidation Plan in Singapore is one of the various repayment schemes available to individuals who find themselves facing difficulties repaying their debt. Many of these schemes can help you regain control of your financial situation and work towards freedom from debt. 

The key to achieving long-term financial well-being is to understand responsible financial management.

Remember that you can always seek advice from any of our Debt Consultants should you feel unsure of the various repayment schemes available. We will be able to provide you with personalised advice and guidance tailored to your situation and needs.