|Lender||Annual Interest Rate||Effective Interest Rate||Processing Fee||Monthly Payment|
|HSBC||3.40%||6.50%||1% of approved loan amount, subject to a minimum of S$88||S$918|
|Bank of China||3.83%||7.48%||$600||S$929|
A debt consolidation plan or DCP takes all of your unsecured debts and consolidates them into one plan. It is a great option for those with bad debt and a low credit score.
Your lender will pay off all of your unsecured loans and then set up a repayment plan with you directly. The interest rate will be lower than most of the debts you had to begin with, but you will have to pay an extra fee of roughly 5%.
You can get up to a full year of salary consolidated at once and set up a repayment scheme between 3 and 10 years of tenure.
The first question to ask yourself is how long you want to take to repay your debt. You can choose anywhere from a year to ten years.
After that, consider how much your total plan will be, including interest rates, extra fees, etc. Make sure to check the terms and conditions carefully to ensure that your new loan arrangements will save you money.
|Debt Consolidation Plan||Best For|
|Standard Chartered Debt Consolidation Plan||Low Monthly Installments|
|HL Bank Debt Consolidation Plan||Flexible Tenure|
|Lending Bee||Easy Application|
|Citi Debt Consolidation Plan||No Processing Fee|
|POSB Debt Consolidation Plan||Fixed Monthly Payment|
Obviously, the first thing to look for in a DCP is a low interest rate. Consider the length of tenure as well. Once you know the answer to these questions, all you need to do is pick the bank that has what you need.
For a start, you need to be a Singapore national or permanent resident. You will also need an annual income between $20,000 and $120,000 with a net worth below $2,000,000. Certain banks may have additional requirements.
A debt consolidation plan helps you get out of a large amount of unsecured debt. Instead of paying a variety of high interest rates, you can pay it all together with an average or low interest rate. You can get a DCP from a lender that you are not directly connected to as well. Debt consolidation plans also provide flexible repayment options.
You will have to consider a few extra fees and charges, such as the following:
A DCP will impact your credit score in the same way any other loan repayment would. It will improve your credit score if you make repayments on time and reduce it if you don’t.
If your total unsecured debts exceed 12 months of your salary, you will not be able to place it all into one DCP. On top of this, your credit score may also affect your interest rate. Lower interest rates may be offered to people with better credit scores.
Before making any decision about a debt consolidation plan, check the current interest rates of each lender. Since you will be paying this interest rate for the entire duration of your loan, you want to get as low as possible.
You should also consider welcome offers such as a lower interest rate for the first few months, promotional rates, etc.
Make sure to sort out your budget long before setting up your debt consolidation plan. Missing payments will build up an insane amount of additional interest and late fees plus you won’t be able to use any other loan to refinance.
Credit cards and other credit facilities that you used will become unavailable. You will not be able to use them as your debt has been transferred to the new bank. That being said, if requested you might get a new credit card with your new lender that you can use when necessary.
You can’t change the credit limit or interest rates, so do your best not to use this credit card either. That way, you can get through your debt consolidation plan faster. Using the credit card simply lengthens the time it takes for you to sort out your remaining debt.
While a debt consolidation plan may help you keep track of your debt, it won’t resolve all of your money problems. You still need to find ways to change your spending habits. It is best to avoid taking any more loans while dealing with your debt consolidation plan.
A debt consolidation plan takes all of your current debts and merges them into one big loan. Doing so puts all of your debt under a single bank. The bank clears all of your outstanding debt and creates a new one for you made up of the total spent.
Doing so reduces the total interest you’ll need to pay and makes it much easier for you to keep track of debt payments.
If you’re having trouble keeping up with high interest rates and long loan tenures, then a debt consolidation plan can help you rearrange your debt. Instead of juggling several different loans with various interest rates, you can have one single loan with a set interest rate.
Not all can, actually. Only unsecured debt, like credit card balances, personal loans, etc., can be consolidated under a debt consolidation plan. Secured debts and some other specific loans, can’t be consolidated.
The bank will take the total of your bills as well as the interest, then add another 5% on top of that. It seems like you’re paying more but you will likely save over time thanks to no olate payment penalties and fluctuating interest rates.
You will need all of the following documents:
There is a 5% extra interest charge, this is the only additional expense, assuming you make your payments on time. This will likely allow you to save in the long-run, as you are less likely to lose track of your payments.
Every lender has a different tenure length. In general tenure can range anywhere between 3 to 10 years.
You will need to consolidate all of your unsecured debt. This is to allow you to enter a DCP where all of your debt is in one place. The purpose is to put all of your debt into one place and make it easier to manage.
If you have a substantial amount of debt, your DCP may not cover all of it. If this is the case, you will need to deal with the remaining unconsolidated debt as well as your DCP.
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OCBC Debt Consolidation Plan
DBS Debt Consolidation
Citi Debt Consolidation Plan
BOC Debt Consolidation Plan
Standard Chartered Debt Consolidation Plan
HSBC Debt Consolidation Plan