Debt consolidation plans

If you have plans to get your finances in order, consolidating your debts using a Debt Consolidation Plan (DCP) is something worth seriously considering. Combine multiple debts, including your credit cards, lines of credit, and even other personal loans at one low rate.

By   |   Verified by Kwok Zhong Li   |   Updated 31st August 2022

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  • FAQs

Are there special eligibility rules for a Debt Consolidation Plan?

Yes. You may or may not qualify depending on:

  • your total debt amount
  • the type of debt you have
  • your annual salary
  • your net assets
  • your citizenship or residency status

See the details in the following questions about eligibility.

Can I consolidate secured debt into a Debt Consolidation Plan?

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.

Can I consolidate special-purpose loans into a debt consolidation loan?

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.

Can I take out a Debt Consolidation Plan if I earn more than $120,000 a year?

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.

How does a Debt Consolidation Plan (DCP) work?

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.

How often will I need to make repayments?

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.

I’m not a citizen or permanent resident of Singapore. Can I still consolidate my debts with a Debt Consolidation Plan?

No. They are intended for Singapore citizens and permanent residents only.

Is there a limit on my net assets which could prevent me from qualifying for a Debt Consolidation Plan?

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.

Is there a minimum amount of debt I must have in order to qualify for a loan to consolidate my debt?

Yes. The total amount of your unsecured debt must be greater than your current annual salary.

What if I don’t qualify for a Debt Consolidation Plan because I’m a foreigner, or because my net assets are too high, or because the type of debt I have is ineligible, or because my debt total is less than my annual salary?

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.

Will consolidating debts damage my credit score?

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.

Will I pay less interest if I consolidate with a personal loan?

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.