What Is a Debt Consolidation Plan and How Does It Work in Singapore?

The 2 Types Of Personal Loans In Singapore To Consolidate Your Debt | Crawfort Singapore

Many people wonder what is a debt consolidation plan and how does it work in Singapore? So, let’s make our concepts clear and understand them better. A Debt Consolidation Plan (DCP) is a financial tool that allows you to consolidate all of your outstanding unsecured debts into a single loan with a financial institution, such as licensed moneylenders or commercial banks.

Essentially, instead of making multiple loan repayments to various banks and financial institutions or registered moneylenders each month, you will only have to make one loan repayment to a single financial institution each month. This will make it simpler for you to keep track of your payback obligations.

 An individual loan for debt consolidation in Singapore is one of the four kinds of personal loans available in the city-state. But before taking a loan you have to know everything in detail, otherwise you can not get the best outcome. So, just for you I am going to discuss all the four types of personal plans which you can take for your business in Singapore. 

Here are the four kinds of personal loan: –

Personal instalment loans

If you borrow you can borrow up to 6x your monthly salary with an annual income of at least S$20,000 and repay it in equal instalments. For large purchases that can be repaid over time, the interest rate ranges from 3.7 percent to 7 percent per year. 

Line of credit

Interest is only paid on the amount taken for financial emergencies. Interest rates range from 18 percent to 22 percent per year on amounts up to 2x monthly income and higher. There are no set terms.

Balance transfer 

In order to consolidate repayments on numerous credit cards, a short-term 0 percent interest account that combines outstanding balances from credit cards is used. After a period of time, the interest rate rises from 17 percent to 28 percent per year 4x monthly wage 3 to 18 months.

Debt Consolidation Plan

Consolidate all of your outstanding unsecured loan obligations into a single payment. No doubt about it, interest rates on debt consolidation loans are high, but the advantage of debt consolidation loans is that they are still lower than those charged by credit cards.

Credit cards in Singapore are known for charging exorbitant interest rates, with an average annual rate of 25 percent on balances owed. DCPs, on the other hand, charge between 3.12 percent and 12 percent per year in fees and charges.

Anyone in Singapore may apply for a debt consolidation loan, but not everyone qualifies: –

The DCP is only accessible to Singaporeans and permanent residents (PRs), and it is not available to visitors. In addition, you’ll need to earn between S$20,000 and S$120,000 each year in order to be eligible. Additionally, your net worth cannot exceed S$2 million

What is the Debt Consolidation Plan and how does it work?

Consider the following scenario: you receive a monthly income of S$3,000. You’ve obtained a large number of credit cards and taken out a number of personal loans.

With the help of these credit cards and personal loans, you’ve been able to purchase high-end watches, designer clothing, new furnishings, and cutting-edge technology. Unfortunately, you have discovered that you are unable to make timely payments on your credit card balances and personal loans. Consequently, you incurred a debt of S$80,000, which is more than 12 times the amount of your monthly income.

Who all can apply?

Anyone in Singapore may apply for a debt consolidation loan, but not everyone qualifies.

In addition, you’ll need to earn between $20,000 and $120,000 each year in order to be eligible. Additionally, your net worth cannot exceed $2 million. There are always some important requirements which have to be in you. If you can fulfil all the requirements then you will easily get the loan from the bank. 

Finally, only individuals who are severely in debt are eligible to apply. Before you may apply for a DCP, you must have a total debt amount that is at least 12 times more than your monthly income. Click here https://crawfort.com/sg/ to know more details about it.