What Is A Debt Consolidation Loan & Do I Need Collateral?

Written by Shannon Wong on July 7, 2022

What is a debt consolidation plan? Do licensed moneylenders in Singapore offer debt consolidation plans? When do you need a debt consolidation plan?

With all the different types of loans available, it can be hard to know which is right for you. Do you need to consolidate your loans? What are the interest rates like? How long will it take to pay off the loan?

This article will answer all of those questions and you’ll also be able to apply here via Singpass!

We’ll explain debt consolidation, how it works, and whether or not you need collateral. Plus, we’ll give you tips on getting the best interest rate and paying your loan as quickly as possible.

Keep reading below!


What Is A Debt Consolidation Loan?

A debt consolidation loan amasses your previous debts, allowing you to reimburse them with a single monthly payment. It can consolidate:

  • Credit card debt
  • Medical debt
  • Payday loans
  • And other types of debt

The goal of loan consolidation is to save money on interest and reduce the number of monthly payments.

A debt consolidation loan can be an excellent way to get out of debt, but it is essential to understand how they work before applying for one. Here are some things you need to know about debt consolidation loan Singapore:

1. Debt consolidation loans are available from banks and licensed moneylenders.

2. In the case of a debt consolidation loan bad credit isn’t essential. Your licensed moneylender will understand that your credit rating isn’t stellar if you need to consolidate debt. The key is showing that your income is enough to disburse the new installments.

3. The interest rate on a loan consolidation will be lower than the interest rates on your individual debts.

4. You will need to make one monthly payment for the entire term of the loan, which is usually three years (though some licensed moneylenders can offer you a longer tenure upon review). Apply from one of the best debt consolidation plan money lenders here.


Do I Need A Collateral For A Debt Consolidation Loan?

No, you don’t need collateral to consolidate debt in Singapore.

Debt consolidation plans are unsecured, meaning they’re not backed by any asset. So, if you’re wondering whether you need to put up your house or car as collateral for a debt consolidation loan, the answer is no.

However, this doesn’t mean that you can consolidate loans risk-free.

If you default on your loan, the lender may take legal action against you. So, if you’re considering taking out a debt consolidation loan, ensure you can afford the monthly repayments.


When Should I Apply For A Debt Consolidation Plan?

Debt consolidation plans can be a great way to get your finances back on track.

But how do you know when it’s the right time to apply for one? Here are a few signs that it might be time to consolidate your debts:

1. You’re struggling to make your minimum payments each month.

If you’re barely scraping by each month, it’s time to consider a debt consolidation plan. This will help you lower your monthly payments and get on top of your debt.

This is extremely dangerous if you’re unable to repay your monthly credit card bills. Credit card interest rates are higher than that of personal loans.

To consolidate your credit card debt, click here and let 1AP Capital help.

2. Your interest rates are high.

If you’re paying sky-high interest rates on your credit cards, consolidating your debt may help you save money in the long run and get out of debt faster.

Trust us, every cent counts.

3. You’re using all of your available credit.

If you’re maxing out your credit cards, it’s a sign that you’re in over your head. Consolidating your debts can help you get back on track and use your credit more wisely.

4. You’re feeling stressed about your debt.

Another sign is if your debt is causing you anxiety or keeping you up at night. Debt consolidation will help you get a handle on your previous loans and start working towards becoming debt-free.


How Do I Apply For A Debt Consolidation Loan?

Debt consolidation in Singapore is easy – maybe too easy. All you need is a pulse, an ID, and proof of income:

  • Computerised payslip for the last 1-3 months, or:
  • Previous 12-month CPF contribution notice, or:
  • Income tax notice

In all seriousness, though, there are a few things you should keep in mind when applying for a debt consolidation loan.

  • Make a thorough debt consolidation loan comparison. Just because one lender offers you a lower rate doesn’t mean they’re the best option.
  • Read the fine print. Loan consolidation often comes with additional fees that can add up in the long run.
  • Ask yourself if a consolidation loan is the right solution for your debt problems. Sometimes it’s better just to bite the bullet and pay off your debts the old-fashioned way – with hard work and dedication.

Whatever you do, research the market before signing on the dotted line.


What Are the Benefits Of Debt Consolidation Loans?

If you’ve ever been in debt, you know it’s not a fun experience. Creditor calls, sleepless nights worrying about how you’ll make your next payment – it’s enough to drive anyone up the wall.

Unless it is a good debt such as a home loan or an education loan, most of us would rather remain debt-free.

But there is a light at the end of the tunnel: debt consolidation loans.

1. Debt consolidation plans help you pay off your debts more quickly and easily. By consolidating all your debts into one loan, you can save on interest and fees, simplifying your monthly payments.

2. Debt consolidation can help you improve your credit score by indicating to creditors that you’re serious about getting out of debt. This is favourable if you’re planning to take a large loan in the future. For example, a good credit score can increase your loan approval chances for a home loan.

3. A debt consolidation loan comes with a longer, more flexible tenure. As a result, your monthly installments will be lower and fit your budget seamlessly.

4. There’s less paperwork. A debt consolidation loan means having just one contract and payment date each month. That means you can easily track your dues and pay your bills on time.

Do debt consolidation loans have risks?

Truthfully, there are no loans without risks. However, there are those with lesser risks or loans that are a lot more manageable.

  • Consolidating debts into a single loan may extend the repayment period, which could lead to paying more in interest over time.
  • Defaulting on a debt consolidation loan can have serious consequences, including damage to your credit score.

A debt consolidation loan can be a great solution if you are struggling with multiple debts. Remember to make a debt consolidation loan comparison and understand the loan terms before applying.


Debt Consolidation Plan Money Lender: 1AP Capital

Several banks and financial institutions offer debt consolidation plans.

1AP Capital offers the best and fastest no-frills debt consolidation plan in Singapore. We offer:

  • Attractive interest rates
  • Flexible repayment schemes
  • A fast and efficient loan approval process
  • Online application (get quotes for free)

Calculate your loan here. Besides, we’ll work with you to tailor this loan to your needs.

Get your quote here.

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