Do you struggle to repay multiple debts every month? If so, did you know a debt consolidation plan (DCP) can make your life much easier?
A DCP consolidates all your existing debts into one single loan, which you now repay at a lower interest rate to one financial institution.
In this article, we’ll discuss what a debt consolidation plan is, what is a debt consolidation plan money lender, what it means to consolidate debts, where to get loans for consolidating debts, and the various debt consolidation plans in Singapore.
What Is A Debt Consolidation Plan?
A debt consolidation plan is a debt refinancing programme that aims to help those who are struggling with their loans repay what they owe with ease.
The refinancing programme allows Singaporeans to consolidate multiple unsecured credit facilities such as unsecured loans and credit cards with various financial institutions, to a debt consolidation financial institution.
In other words, a debt consolidation plan helps those who have taken loans from different lenders repay their debts without many problems.
If you don’t have this plan, you have to pay different licensed money lenders or financial institutions every month at varying interest rates.
But with a debt consolidation plan, you need only remit the whole amount (to all financial institutions that you owe) through a debt consolidation plan money lender.
Alternatively, you can opt for a debt consolidation loan with a licensed money lender.
This is a type of personal loan that also works to consolidate your debt through a debt consolidation plan money lender. But the eligibility criteria are different from that of a DCP.
How A Debt Consolidation Plan Works
As mentioned, a DCP helps you put together all outstanding unsecured loan debts into one loan. The aim is to repay your debts at a lower interest rate.
A debt consolidation loan plan will not be a good choice for you if you have only one outstanding loan or you’ve never had a problem repaying your loan.
But it is a perfect remedy if you are struggling to meet the various debt repayments at the end of the month.
Here is an illustration:
Let’s say your monthly gross income is $5,000. However, you’ve borrowed money from different financial institutions including licensed money lenders to buy a few things you need such as clothes, shoes, and furniture.
Unfortunately, when it is time to repay what you owe, you find out that the money has accrued to a whopping amount.
You decide to look for a debt consolidation plan money lender. With a DCP, you will now have only one debt consolidation plan money lender to repay each month – but the money will finally reach all the other money lenders that you owe.
What A Debt Consolidation Plan Can Be Used For
A debt consolidation plan can only be used on credit cards and unsecured credit facilities with different financial institutions.
But you cannot use a DCP for these unsecured loan accounts:
- Education loans
- Renovation loans
- Medical loans
- Loans that were given under joint accounts
- Credit facilities that are related to business
So can a debt consolidation plan be used for secured loans? No, it can’t. Secured loans, including housing, business, and renovation loans, are not covered under a DCP.
Who Can Apply For The Debt Consolidated Plan In Singapore?
Not everyone is eligible for a debt consolidation plan in Singapore. To qualify for debt consolidation with a debt consolidation plan money lender, you must:
- Be a citizen of Singapore or a permanent resident
- Earn annual income between $20,000 to $120,000 with net personal assets of less than $2 million
- Have outstanding loans on credit cards and unsecured credit facilities that are at least 12 times your monthly income
You can get a DCP from the following financial institutions:
- American Express International, Inc.
- Bank of China Limited Singapore
- CIMB Bank Berhad
- Citibank Singapore Limited
- DBS Bank Ltd
- Diners Club Singapore Pte Ltd
- HL Bank
- HSBC Bank (Singapore) Limited
- Industrial and Commercial Bank of China Limited
- Standard Chartered Bank (Singapore) Limited
- Maybank Singapore Limited
- Oversea-Chinese Banking Corporation Limited
- RHB Bank Berhad
- United Overseas Bank Limited
What Documents Do I Need To Qualify For A Debt Consolidation Plan?
To apply for a DCP, you’ll need to have the following documents:
- NRIC (front and back)
- Latest income statements
- Credit Bureau Report
- Confirmation letters from relevant institutions showing principal balances (unbilled) for installment plans that are unsecured
- Latest credit card statements, as well as unsecured credit
- Any other document(s) that may be required by the financial institution you are applying to
What To Note Before Applying
Before you apply for a consolidating debt plan in Singapore, you should make sure you understand how it works, what it can help you solve, and that you have all the necessary documents.
In addition, you need to put the following four things in mind:
1. An Additional 5% Is Required
Upon approval of your DCP, the financial institutions you owe will calculate the total amount you owe them as follows:
- Total outstanding debt
- Outstanding interest
- An additional 5% interest
The additional 5% is used as a buffer. So not be alarmed when you see an additional 5% being reflected.
This can help to pay any incidental expenses you may have had between the time the DCP was approved and when the DCP funds were received.
2. Approved DCP Amount May Be Less Than Entire Debt Amount
Note that the approved DCP amount may be lower than the entire loan amount. Although the licensed money lender you are dealing with may try to help you solve your problem, your debt and income matter.
In most cases, the approved DCP is likely to be less than the actual debt. Hence, you may be left with the burden of finding a way to repay the remaining amount.
3. All Your Unsecured Credit Facilities, Credit Lines Will Remain Suspended
Your credit lines, as well as credit facilities , will be suspended as long as they are unsecured. This will start once your DCP has been approved.
4. You Cannot Use Switch To Another Institution Before Three Months
Let’s say you applied for a DCP from one financial institution. You found a lower interest rate elsewhere, so you decide to switch to another institution.
You will have to wait for three months to elapse before the other financial institution evaluates and accepts your application.
Alternatives To A DCP
As mentioned, a debt consolidation plan money lender can be a good alternative to banks. However, it is important to choose trustworthy lenders that are legally licensed by the Ministry of Law’s Registry of Moneylenders.
Some of the benefits that you can enjoy by taking debt consolidation loans from a licensed debt consolidation plan money lender are:
- Quick approval process
- Lenient eligibility requirements
- More flexible repayment schemes depending on your debts
- Affordable interest rates
To apply for a debt consolidation loan from a licensed debt consolidation plan money lender, Singaporeans and permanent residents must:
- Be 21 to 65 years old
- Earn at least $20,000 annually
- Present their NRIC
Foreigners must present their:
- Employment pass
- Proof of residency
- Bank statements or payslips
It is crucial that you stay away from illegal debt consolidation plan money lenders that might put you in more debt, or even worse, land you in legal trouble.
Choose The Right Debt Consolidation Plan Money Lender
There is no doubt that debt consolidation plans and debt consolidation loans have their merits when used responsibly.
But it may help to examine why you got into so much debt in the first place. Change your spending habits to stay permanently debt-free.
If you need a debt consolidation loan, consider Lending Bee.
We are one of the top licensed money lenders in Singapore, offering some of the most affordable interest rates and flexible terms.
About Ashley Sim
Calling herself a “professional multi-tasker”, Ashley worked as a relationship manager in a bank for five years. She left her job just before the pandemic happened and became a freelance writer for about a year. Now, she’s making the most of her love for writing and knowledge of the banking and financial industry in her role as a content marketing lead. She hopes to help people make better financial decisions through her content and campaigns.