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A Debt Consolidation Plan (or DCP) can be helpful if you have a number of outstanding debts that you are struggling to repay — several credit cards, perhaps, plus other unsecured personal loans — or are finding difficult to manage because you need to make several repayments every month into different accounts.
Your debt consolidation loan total amount needs to cover all your outstanding debts plus a further 5% of the total as a buffer to cover any additional unforeseen charges. If your loan application is successful your DCP lender will pay off your existing debts on your behalf and also close the accounts, using the details you supplied.
This will leave you with a single debt and one monthly repayment, which is not only easier to manage but could also extend your repayment term (making the total monthly repayment smaller) and very probably reduce the overall interest rate on your debt.
Yes. You may or may not qualify depending on:
See the details in the following questions about eligibility.
Yes. The total amount of your unsecured debt must be greater than your current annual salary.
No. Debt Consolidation Plans are only intended for unsecured debt (such as credit cards and unsecured personal loans), not for debt secured on property such as a car or your home.
In most cases, no. Loans taken out for specific purposes — such as home renovation, education, medical or business purposes — cannot usually be consolidated into a personal Debt Consolidation Plan.
No. Debt Consolidation Plans are only intended for people earning less than $120,000. Consider another type of personal loan, such as a balance transfer personal loan.
Yes. Your net assets (that is, the total value of everything you own — including property, shares and other investments — minus the total amount of your debts, including your mortgage) cannot be greater than $2 million.
No. They are intended for Singapore citizens and permanent residents only.
You can still have a ‘Do It Yourself’ Debt Consolidation Plan. Just add up all your debts to work out how much you need to borrow. Apply for a personal loan (for example a balance transfer personal loan) for this amount, and if you are successful you will receive a lump sum in cash which you can use to repay all your existing debt, leaving you with a single monthly repayment which should be at a lower overall interest rate.
Debt Consolidation Plan interest rates are much lower than credit card interest rates. So if your existing debt includes one or more credit card debts, it is very likely that the interest amount charged each month will be less than you were previously paying. However, if you choose a long repayment period (loan tenure or loan tenor) for your debt consolidation you will continue paying interest for a greater amount of time, which could reduce your overall interest saving.
You will be required to make equal monthly repayments of an amount that will see your loan cleared in full by the end of the agreed repayment period.
Your new loan will certainly be recorded in your file at the credit bureaux. But so will the fact that you have repaid all your other loans. Provided you keep up with the monthly repayments on your new loan, it should in fact have a positive impact on your credit score.