June 26, 2022
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Business

Considerations for Getting a Debt Consolidation Plan in Singapore

Do you have a mountain of credit card debt that you can’t seem to get rid of? Looking for an easier method to keep track of the several credit card bills you have to pay each month?

If so, keep reading to find out more about Singapore’s Debt Consolidation Plan (DCP), which may be able to assist you in regaining control of your finances and making a game plan for paying off your debts.

In what ways might a Debt Consolidation Plan benefit borrowers?

In a DCP, a borrower may consolidate all of his or her unsecured credit obligations due to numerous financial institutions into one single loan owed to one financial institution.

Borrowers with several unsecured facilities or balances with different banks may use the debt consolidation for licensed moneylender, which was created in 2017 to help them discharge their obligations. It’s a commercial product that banks sell to help people stay on top of their debt payments.

What exactly is a debt consolidation plan?

In a debt consolidation plan, or “DCP loan,” you can consolidate all of your unsecured debt (e.g. outstanding credit card bills and personal loans from different banks) into a single loan with one bank, making it easier to manage your finances.

As long as you keep up with your DCP repayments, you won’t have to worry about any of your other debts being paid off or your unsecured accounts being closed.

Debt consolidation plans have lower interest rates than credit cards and unsecured credit lines, which may be as high as 28.88 percent p.a. or more on average, despite the fact that the aggregated balance can make you break out in cold sweat.

What are the prerequisites for getting a Debt Consolidation Plan?

Whatever financial institution you choose to get your debt consolidation plan from, you must meet a few minimal conditions in order to be eligible. Only Singapore nationals and permanent residents may benefit from debt consolidation schemes. There is a $2 million net personal asset limit for those who earn between $20,000 and $120,000 per year.

You can’t have more than $2 million in total assets (including real estate and stock) if you have no debts (such as a mortgage or back taxes).Finally, in order to be eligible, you must owe a significant amount of money. Specifically, you must have at least a year’s worth of wages in unsecured debt.

Unsecured credit, such as credit cards, personal loans, and home equity lines of credit, are not eligible for debt consolidation. A DCP cannot be used to combine secured debts, such as a vehicle loan or a mortgage, or a loan for a particular purpose, such as a business loan or a loan for schooling.

The conditions of your DCP, like as the money lender interest rates and payback time, may vary depending on the financial institution you contact, so keep this in mind when choosing which bank to approach. To help you save money, several financial institutions provide promotional interest rates or complimentary insurance.

Applying for a Singapore Debt Consolidation Plan

Begin by contacting your preferred bank to inquire about a Deferred Compensation Plan (DCP). In addition, the financial institution will be able to provide guidance on how to apply for the DCP.

To apply for a DCP, you may be needed to provide the following papers, which differ from financial institution to financial institution:

  • Please bring a copy of your National Identity Card (NRIC) (front and back). The front and back of your NRIC and a copy of your passport are necessary if you are a Permanent Resident.
  • Most recent credit report. Accessing the Credit Bureau of Singapore’s website will allow you to download this copy.
  • In the case of salaried workers, your most recent 12-month CPF contribution history statement and your most recent two-year income tax Notice of Assessment are required. In the event you are self-employed, your most recent two-year income tax Notice of Assessment is required.
  • Copy of your most recent credit card and unsecured credit facility statements and a confirmation letter confirming unbilled principle amounts for unsecured credit instalment plans from banks you have taken loans from (if any).

Conclusion

Because it helps you consolidate all of your unsecured debt into one payment to one credit institution, the DCP is an effective strategy for keeping your interest costs low. In addition, the revolving credit facility gives you the ability to draw extra funds in the event that you find yourself in a scenario where additional funds are required. So consider all necessary factors and apply for the Debt Consolidation Plan before the top licensed moneylender in Singapore.