Many of us in Singapore may find ourselves battling financial challenges, with the ever-rising cost of living and demands to meet our families' needs, we may even find ourselves faced with mounting debt. It is crucial that we find a way to, if not avoid, manage the debt accrued and attain financial freedom and stability. 

One available solution, that not many may be aware of, is Debt Management Plan (DMP). In this guide, we will explore how DMP works, its benefits, and the various steps individuals can take.

What Does Debt Look Like In Singapore? 

Singapore continues to be a global financial hub with a high standard of living. This can actually lead more individuals to the temptation of accumulating debt. Many may feel the need to take out personal loans, credit cards, and other means of additional money to keep up with their needs and lifestyles. More often than not, this can escalate and end in a rather daunting financial situation. 

What Is Debt Management Plan (DMP) In Singapore?

At Debtox, we understand that facing your financial situation and getting help managing your debt can be an overwhelming situation. This is why, our Debt Consultants aim to help you understand the various options available to you and tailor a repayment plan suited to your needs and capabilities. 

Debt Management Plan in Singapore refers to an affordable, structured repayment scheme that is designed to help individuals repay and manage their unsecured debts, such as credit card bills and personal loans. However, DMP is not the only option available to those who have found themselves in debt, Debt Repayment Scheme (DRS) is another possible course of action. 

Related Article: Your Guide To Debt Repayment Scheme In Singapore (2023)

The Debt Management Plan in Singapore is facilitated by Credit Counseling Singapore (CCS). CCS acts as a third party between the debtor and creditors to establish a repayment plan that is both realistic and sustainable. 

How Does Debt Management Plan Work In Singapore?

In order to aid you in understanding the steps and requirements needed to begin DMP in Singapore, you will first need to be assessed by CCS. The assessment will analyse your income, expenses, and total accrued debt. 

Credit Counselling Singapore will then begin negotiations with your creditors on your behalf in order to help you secure lowered interest rates, waiver existing fees, or even extend the previously agreed upon repayment period. 

Once CCS has completed negotiations and agreements have been put in place, your total debt tenure will be adjusted and you will begin your monthly repayments at a reduced interest rate. Do take note that your interest will not be paused, it will still accumulate but at a lowered rate. The main benefit here is the assistance you receive from CCS in extending your tenure period without involving legal processes.

In addition, undergoing and successfully completing a DMP is less detrimental to your overall credit score as compared to failing to make monthly repayments to your creditors altogether. 

What Are Some Benefits Of Debt Management Plan In Singapore?

A primary benefit of Debt Management Plan is that it allows for an extended tenure. This allows debtors to focus on making payments that are feasible based on their monthly income and other necessary expenses.

Additionally, in the case of DMP, lowered interest rates are often decided upon for the monthly repayments. This reduces the stress of having to think about the high interest rates on your various repayments to multiple creditors. 

Another benefit that comes with entering Debt Management Plan in Singapore is that it often deters creditors from pursuing legal action against you if you have been unable to meet the previously stated monthly repayments, so long as you keep to the newly negotiated monthly repayments made as agreed upon by CCS.

Lastly, making that first step to seek help from a financial institute like CCS or Debtox, will often lead to you learning about making informed financial decisions and picking up important budgeting tips that will help you out in the long run. This newly imparted knowledge can prevent you from running into further debt in the future. 

What Is The Eligibility For Debt Management Plan In Singapore? 

Now that you have a better understanding of Debt Management Plan in Singapore, we would like to help you understand your eligibility. DMP will cover all unsecured debt, this refers to your credit cards, personal loans, and loans taken from *licensed moneylenders. However, a DMP excludes hire purchases, telco bills, and repossessed vehicle balances. 

In order to be eligible for DMP in Singapore, you will need to show proof of a regular source of income. This is to ensure that you will be able to make the regular payments that were previously agreed upon during the negotiation stage. 

Debtors will also need to indicate that they are facing financial difficulties and therefore, are unable to meet their current repayments to their multiple creditors. 

However, it is important to note that while CCS may aid you in extending your repayment tenure, the interest from your debt with licensed moneylenders often still accrues almost double the amount that you originally took out over the maximum of 2 years. 

We would like to highlight that CCS typically only admits debtors if their credit rating has been severely affected due to multiple defaults to payment. 

This means that if you're making minimum payments as needed, your credit score is not greatly affected. As such, you may be told you may not require DMP when approaching CCS. Essentially, you may have to continue making your min payments but you will fail to see your principal reduce. In this case, your situation may be more suited for Debt Repayment Scheme.

Additionally, this means that your total debt will not decrease in the long run, as the minimum payments are typically not sufficient to result in the total outstanding debt reducing. 

What Are The Steps To Enrol In Debt Management Plan In Singapore?

Before entering DMP in Singapore, we recommend that you conduct your own research into the different options available to help you clear your path towards freedom from debt. At Debtox, our Debt Consultants offer a personalised one-to-one session to help you understand all available schemes.  

If you decide to proceed with DMP in Singapore, we recommend that you get in touch with CCS to schedule a consultation to further discuss your financial situation and options. You will be required to attend a talk in the initial stages to help you understand how CCS can help you. 

You will be required to provide financial information and documents to allow CCS to conduct a comprehensive assessment and determine your eligibility for the Debt Management Plan. 

At this point, negotiations between your creditors and CCS will commence before a feasible repayment plan can be established. Afterwhich, you will begin making regular repayments to your various creditors individually.  It is important to note that dmp is not a consolidated repayment. 

Periodic reviews will likely be conducted to reassess your financial situation and if there are any changes that need to be made. 

In Conclusion...

Debt Management Plans in Singapore remains an option for debtors facing the challenges of unmanageable debt. DMP provides individuals with professional guidance, aid in negotiation with creditors, and drawing out a structured repayment plan. 

However, it is important to note that DMP might not be the most suitable option for all. We encourage you to check out our various guides on the alternatives available in Singapore to aid debtors in achieving financial freedom. You may also reach out to us for an obligation-free consultation to help you further understand how you can regain control of their finances and work towards a debt-free future.