Thu. Nov 26th, 2020

Debt Consolidation Plan in Singapore: What Is It and How It Works

Are you looking for the meaning of the debt consolidation plan? Debt consolidation loans are generally loan plans offered by financial institutions in Singapore. Different financial institutions offer different debt consolidation plans to their clients. Let’s study what debt consolidation plan is and how it works.

DEBT CONSOLIDATION LOANS

Debt consolidation is an arrangement made by financial institutions to reduce the burden of individuals. Consolidation is a process of piling up different loans of an individual into one single loan. This is mainly done to reduce the burden of an individual. Debt consolidation plants have various advantages. This is the main reason the plan is gaining a considerable prominence in Singapore. The plan came into the picture in the year 2017. Under debt consolidation, the debt consolidator expert does a thorough study of all your loans. After estimating the overall debts, the expert converts all the debts into one.

The expert must analyze each and every loan in detail. Only the unsecured loans fall under the list of the debt consolidation plan. This is the main reason why the experts do an in-depth analysis of the loan. Not a single loan of the secured category can fall into a debt consolidation plan. The debt consolidation plan follows stringent policies of study. This is the main reason the experts ask you to submit each and every detailed document of the loan. You just cannot qualify for a debt consolidation loan in a blink of an eye.

HOW DOES IT WORK?

The debt consolidation plan was started in Singapore in the year 2017. The plan is offered only to Singaporeans. No another outside stand eligible for the plan. The consolidation plan is only made to pile up unsecured loans. Singapore personal loans or car loan cannot fall into this category. This is because these are all the secured loans of the capital, and secured loans cannot qualify for a debt consolidation plan.

Debt consolidation plan takes all your unsecured loans and turns that into a single loan. It basically pays pack all the existing loans of an individual. The amount utilized for paying back the loans is the bank’s amount. Now the individual has to pay back the loan to the debt consolidation Bank. The debt consolidation plan comes with a specific rate of interest. The rate of interest is probably less than the interest rate you pay on other unsecured loans. The interest rate on other unsecured loans like credit cards varies from 20 to 30% in Singapore. The debt consolidation plan asks an interest rate between 8 to 10%. This is much less than the interest rate you pay on unsecured loans.

It is one of the best methods an individual can go with. But debt consolidation plan is not made for everyone. There are various rules and regulations imposed on the debt consolidation plan. It is not an easy task to complete in a day. The process is long since it involves clubbing together various loans with different criteria. The criteria for the debt consolidation plan are very different. Let’s tell you how you can qualify for a debt consolidation plan.

  • You have to be a citizen of Singapore or a permanent dweller. This is because this scheme is offered only to the citizens of Singapore.
  • The loans you owe to the finance company should only be unsecured loans. You can not qualify for debt consolidation with secured loans.
  • Your loan amount should be 12 times more than your monthly salary.
  • You can only qualify for a debt consolidation plan if you have an annual income of a minimum of $30,000 to a maximum of $1,20,000 in Singapore.

An individual can opt for one DCP at a time. You cannot take more than one TCP in one shot. You can pay the entire amount of the existing DCP plan with another DCP after three months. You can do this if you find another financial institution offering you a lower rate of interest.

ADVANTAGES OF DEBT CONSOLIDATION PLAN

LOWER INTEREST RATE: The primary purpose behind opting for a debt consolidation plan is to get a lower interest rate. Every loan comes with different interest rates and different tenure. This varies from institution to institution. If an individual is under various on secured loans, it becomes difficult to handle. This is because different loans have different payments of time and different calculations.

The calculation of different loans with a different interest rate is a hectic job. To complete this task, a lot of individuals hire financial advisors. This incurs additional expense to the investor. The best solution to this is opting for a debt consolidation plan. The debt consolidation plan brings all your loan under one roof with a single rate of interest. The interest rate is quite less compared to other unsecured loans.

EXTENDED TENURE: Another great advantage of a debt consolidation plan is you can extend your loan tenure. The loan tenure under the debt consolidation plan can last up to 7 to 10 years. This is a huge period to pay back the loan. Not every financial institution will offer you such grand plans. Before buying any plan, read the terms and conditions efficiently. By reading the terms and conditions, you become more clear about the tenure of the loan. You can easily choose the tenure as per your requirement and convenience.

REDUCE OF BURDEN: The main benefit of going with a debt consolidation plan is a reduced burden. If you are an individual with multiple unsecured loans, then this is the best option for you. Multiple unsecured loans come with multiple interest rates. With this, the tenure also adds the fuel. As an individual, is it difficult to concentrate on multiple features of multiple loans? The calculation task of interest is the main hectic work. In addition to this, maintaining different time payment periods of different loans gets annoying. By clubbing all the loans together, you are not required to do multitasking. A debt consolidation loan is a single loan with a single rate of interest with a single EMI.

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