It is not uncommon for people to get into a financial bind and struggle to pay their debts on time.
Do you have high credit card balances and personal loans, and find yourself unable to make payments on time? What if you could consolidate all of your debt into one manageable monthly payment?
This is when a debt consolidation plan money lender may come in handy.
A debt consolidation plan consolidates your debts into one single loan. The benefits of this are twofold: lower monthly payments and a longer term for the repayment of your loans.
In this article, you will get the answers to your most pressing questions about a debt consolidation plan money lender and how this type of financial help can benefit you.
What Is A Debt Consolidation Plan?
In general, debt consolidation involves combining all your debts into one loan and paying off one financial institution or money lender.
Likewise, a debt consolidation plan (DCP) is a refinancing programme that allows a borrower who is overwhelmed by debts to combine them into one loan.
The DCP programme in Singapore was started in 2017 by the Association of Banks in Singapore. A debt consolidation plan allows you to consolidate loans you currently have with multiple financial institutions under one lender, such as a bank or a money lender.
It is suitable for those who are struggling with multiple debt repayments. In most cases, a DCP gives the borrower a longer repayment period and a lower monthly repayment.
A debt consolidation plan eases your debt burden, making it easy for you to pay your loan as per schedule.
If you are struggling with credit card debt or any other debt that is snowballing, consider approaching a bank or a debt consolidation plan money lender.
These lenders have various debt consolidation offers available. This is why it’s important to check which is the best.
In Singapore, most DCPs will offer you an interest rate of 3-12 % per annum for a repayment period of one to 10 years.
Start by checking whether your loans qualify for a DCP, then select the best option for your needs.
How DCP Works
Borrowers with multiple loans may find it hard to keep up with various repayment schedules.
If you have credit card debts and personal loans, and also owe debts to unlicensed money lenders, it may become difficult to keep up with the repayment dates.
Owing multiple lenders may be difficult to track, leading to missed payments and even more fees as a result.
Debt consolidation plans in Singapore help you combine all your debts into one loan. In doing so, you get a lower monthly repayment amount and a longer loan tenure.
You need to work with a trusted licensed money lender like U Credit or a bank, then tailor the debt consolidation plan to suit your needs.
What will happen is that the money lender or bank will pay off your multiple loans and then combine all the paid loans into one debt. The lender will advise you on the best payment plan for you.
Make sure the repayment plan works for you and that you are able to strictly adhere to it.
Debt consolidation has the following benefits:
- It makes it easy to track debt. You can easily manage one loan and ensure there are no missed repayments.
- With a DCP, you get a longer loan tenure, lower repayment, and lower interest rates, making it easier to pay your debts.
- It has a quick and easy application process.
A debt consolidation plan is recommended when your outstanding debts are more than 12 times your salary.
Debt consolidation will help you keep track of your debts and avoid any missed repayments.
What A Debt Consolidation Plan Can Be Used For
Debt consolidation will help you better take charge of your finances by combining all your debts into one.
It’s important to note that not all debts can be consolidated into one loan. In this section, we will look at the type of loans that debt consolidation plans can cover.
Credit Card Debt
A lot of people in Singapore have credit cards. Failure to pay credit card debt on time can lead to debt snowballing, making the debt impossible to pay.
If you are facing such a scenario, consider consolidating the debt into a single loan.
Unsecured Personal Loans
If you have accumulated several unsecured loans and it is becoming difficult to keep up with repayments, consider a debt consolidation plan.
Speak to a bank or debt consolidation plan money lender for a plan that best suits your needs.
What A DCP Does Not Cover
Debt consolidation will help you sort out some loans, but not all loans can be included in a debt consolidation plan. The following types of unsecured loans are not covered in a debt consolidation plan:
- Renovation loans
- Education loans
- Medical loans
- Business-related loans
That said, car loans, property loans, and business loans can be consolidated under a DCP.
Who Can Apply For A DCP
To qualify for a DCP, you need to meet the following criteria:
- You must be a Singaporean citizen or permanent resident
- Must have a salary of $20,000 to $120,000
- Your net assets must not exceed $200,000
- Your total loans must not exceed 12 months’ worth of gross income.
Foreigners cannot apply to the DCP.
It’s important to note that you can only have one DCP at a time. However, you can refinance your debt plan to get a lower interest rate after three months.
If you opt for refinancing, check the terms of the new plan and ensure they are better. Make sure there is no penalty if you terminate your current debt consolidation plan.
You also need to know that while you are enrolled in an active DCP, you will not qualify for a new loan or credit card until your debt is less than eight times your monthly salary.
This gives you time to focus on current debts and pay them off.
When applying for a DCP, you will need the following documents:
- Front and back copies of your NRIC card
- Report from a credit bureau
- Latest payslip or income statement.
- Loan statements including all outstanding debts
- Confirmation letter showing the outstanding principal balances
If you have other transactions that aren’t reflected on the statement, make sure you have evidence.
How Much Can I Borrow From A Debt Consolidation Plan?
The amount you can borrow for debt consolidation depends on the amount indicated in your loan statements. This will also include charges accrued.
In addition to the amounts in your loan statements, your DCP may include an extra 5% to help you deal with any incidental charges that may occur.
The extra 5% is not deposited in your savings or current account.
Instead, it goes to the financial institution or money lender that incurred any extra charges. Any excess amount from the 5% is deposited back into the bank.
If the DCP is not sufficient to settle your debts, you will need to pay the balance in cash to the lender you owe.
Dos And Don’ts Of Debt Consolidation Plans
When considering a debt consolidation plan, here are some dos and don’ts to take note of.
Do Look For The Best DCP Loan Terms
Before you opt for any DCP programmes, make sure you research the best loan terms. Find a plan with a lower interest rate and the best repayment terms.
Remember, the longer the repayment terms, the more interest you will pay. However, it is crucial to choose a plan that suits you.
Do Change Your Spending Habits
A debt consolidation plan takes the stress of paying multiple loans. Once you find a suitable DCP plan, make sure you stick to your budget and change your spending habits.
As far as possible, find ways to reduce your spending and increase your income.
Don’t Miss A Payment
Create a monthly budget and include the debt consolidation plan payments. Any missed payments will incur penalties and make a further dent in your credit score. So make sure you pay your debt consolidation plan on time.
Don’t Use The Credit Facility
After you sign up for a debt consolidation plan, you will not be eligible for loans.
However, a DCP has a revolving credit facility that is equal to one month of your monthly salary. This is meant to help you in times of emergency or cover daily expenses.
It is best to avoid using the credit facility as that will incur more interest and give you an additional amount to pay.
Alternatives To A DCP
If you don’t qualify for a DCP from a bank, you can visit a debt consolidation plan money lender.
Some licensed money lenders offer a debt consolidation loan that you can use to settle your debts. Start by calculating your total debts and checking what the licensed lender will offer.
Licensed lenders are likely to offer you loans of up to six times your salary. You can use the money to pay off your debts.
Although licensed lenders are governed by moneylending regulations, it’s important to make sure you compare the interest and terms of different lenders before you commit to a debt consolidation plan.
The biggest perk of a DCP is that it consolidates your debts and enables you to focus on paying only one debt. This reduces the chances of missed payments and enables you to manage your finances better.
Choose The Right Debt Consolidation Plan Money Lender
If you have a lot of debts, you should consider consolidating them.
This will make it easier for you to keep track of your debts and make sure that you are making progress toward paying them off.
A debt consolidation plan money lender is a good option to get out of debt.
The right debt consolidation plan can help you get a lower interest rate, and also help you get rid of some of your debts.
If you’re considering this type of plan, be sure to shop around and compare interest rates and terms before you choose a money lender.
Visit U Credit for the best DCP loan terms. We offer some of the most affordable loans in Singapore, making your loan consolidation journey even easier.