What Is A Money Lender Debt Consolidation Plan?

Written by Shannon Wong on November 17, 2022

If you are having a hard time paying your debts in Singapore, you should not lose hope.

Many debtors in Singapore are having the same issue due to the prevailing difficult economic times.

When you have many debts, it may become difficult to keep up with multiple monthly payments, especially if they are from different lenders.

A debt consolidation plan money lender is one easy option for getting back on track.

With a money lender debt consolidation plan, a customised repayment plan that fits your current income will make paying your debts easier. The money lender will pay the banks and money lenders that you owe money to on your behalf.

Loans that you can combine include credit cards and personal loans, among other unsecured debts.

It’s simpler to make monthly payments when multiple loans are combined into one, and you can save a lot of money by doing so.

This debt consolidation plan money lender guide will show you how to solve your debt issues.

What Is A Debt Consolidation Plan?

Debt repayment can be challenging, particularly if you have several high-interest debts. The process of combining multiple debts into a single new loan is known as a debt consolidation plan (DCP).

It aims to simplify debt in order to lower monthly payments, pay off debt more quickly, and pay less interest overall.

When you consolidate loans, a debt consolidation plan money lender takes on all of your unsecured loans in a single loan. This means you’ll only have to pay one lender once per month.

In other words, you’ll be able to manage your repayments more easily.

Furthermore, depending on your creditworthiness, combining your debts may qualify you for a lower interest rate and smaller payments.

What A Debt Consolidation Plan Can Be Used For

A debt consolidation plan involves applying for a new loan with an amount that is enough to pay off your existing debts.

However, it is important to note that such debt consolidation plans in Singapore are only available for combining unsecured debts such as credit lines, personal loans, and credit card loans. It does not include secured loans.

The objective of a DCP is to consolidate existing high-interest credit card debts into a single loan with a lower interest rate. This will save you money on interest charges and help you get out of your debt faster and more smoothly.

The other reason to go for a debt consolidation loan in Singapore is to aggregate your personal and credit loans into one loan with a single installment.

If you are able to get a lender with a lower interest, it can also save you money on interest charges and help you get out of debt faster.

Lastly, debt consolidation can provide relief from the stress that comes with having debt collectors at your doorstep every now and then.

Dealing with just one lender is much easier, especially when your repayment is due.

What It Excludes

A debt consolidation plan doesn’t take care of outstanding secured loans such as car loans and housing loans.

It also excludes business-related credit facilities, loans granted under joint accounts, education loans, medical loans, and renovation loans.

Who Can Apply For The DCP

Singaporeans and permanent residents who are struggling to make the required payments on multiple high-interest debts are eligible for debt consolidation plans in Singapore.

To qualify for a debt consolidation loan, you must have debt that exceeds 12 times your monthly salary.

When you apply for a debt consolidation loan, the bank gives you a loan amount that matches your total outstanding debt. This total includes all applicable fees and expenses incurred as a result of the debts.

You will need the following documents to apply for a debt consolidation plan:

  • Most recent credit report from a bureau showing your credit score
  • A copy of your NRIC
  • Last three months’ income tax returns
  • Most recent unsecured loan and credit card statements
  •  A listing of your unsecured credit card balances that have not yet been billed, as well as your payment schedule.

Foreigners working in Singapore who have a valid work permit are also required to provide proof of their residence (e.g. utility bills, tenancy agreement) and payslips/salary bank account statements.

In addition, you will only qualify for a debt consolidation plan if you don’t already have an existing one that you got approved for less than three months ago.

Refinancing your most recent DCP is subject to an early termination penalty fee imposed by the original DCP financial institution.

How It Works

The debt consolidation plan assists borrowers in paying their debts collectively as one loan in an affordable repayment – sometimes at a lower interest rate.

Once the consolidation loan is approved, your debt consolidation plan money lender  will then pay off all of your unsecured debts.

After that, you will repay your money lender over a period of time that you agreed upon when applying for the loan by making regular monthly payments.

When this personal loan is repaid in full, the credit line is shut down and will no longer be available to you.

Note that the amount that the bank approves may be less than what you need to consolidate your outstanding balances. In that case, you will have to pay the balance.

An additional 5% over the total debt consolidation amount will also be included in your initial debt consolidation plan. This extra money is used to cover any fees you might have accumulated before the loans are paid off.

You will also be charged interest, just like any loan. Normally, the interest charges are part of your monthly payments and spread out over the period of the loan.

Your monthly payments will be lower if you choose a longer term. However, the shorter the term, the better, because you’ll pay less interest over time compared to a longer term. Of course, ensure that you can afford it.

Even though a DCP is a good way of sorting your financial stress, it is important to make the monthly repayments on time.

Where To Apply For A DCP

In Singapore, a debt consolidation loan can be applied from any of the financial institutions listed below. You don’t have to be an existing customer to access the services.

  • American Express International, Inc.
  • Bank of China Limited Singapore
  • CIMB Bank Berhad
  • Citibank Singapore Limited
  • DBS Bank
  • Diners Club Singapore Pte Ltd
  • HL Bank
  • HSBC Bank
  • Standard Chartered Bank
  • Maybank
  • OCBC Bank
  • RHB Bank Berhad
  • United Overseas Bank
  • Industrial and Commercial Bank of China

From time to time, new financial institutions may be added and/or replaced.

If you qualify, the bank will review your debt consolidation plan application, including all the required documents. You will be asked to sign the agreement.

Read the loan agreement carefully and commit to it. If something is unclear, it is important to get clarification before signing the agreement.

Alternatives To The DCP

Obtaining a debt consolidation plan from banks can be challenging due to their stringent requirements.

If you are rejected, there are reputable money lenders in Singapore that offer you alternative repayment plans. The following loans for consolidating debt are available:

Money Lender Personal Loan

When it comes to debt consolidation loans, money lenders in Singapore are well-known for their quick approval processes and less-stringent eligibility requirements.

They can approve your loan in 30 minutes to 24 hours. Their online application form makes it simpler to apply for one.

The first alternative a legal money lender can give you is a personal loan. You will then use the loan proceeds to settle the outstanding debts and be paying the consolidation loan in manageable monthly payments.

It is advisable that you only borrow from a registered and licensed lender if you want to enjoy the full benefits of debt consolidation. Below are the benefits of using a licensed money lender:

  • Easy online application
  • Low interest rates
  • Flexible monthly repayments
  • Flexible loan tenure
  • Minimum eligibility requirements
  • Fast approval

Home Equity Loan

There are advantages and risks in using a home equity loan to consolidate debts.

Although home equity loans typically have lower interest rates when you have a lot of equity in your home, you might lose your home if you don’t repay the loan.

What To Consider Before Applying

Taking out a loan is a weighty commitment, and it takes discipline to stay on top of your payments each month and avoid accruing late fees.

There are also other things to consider before approaching a debt consolidation plan money lender in Singapore.

Firstly, make sure the debt consolidation loan you choose has better rates and fewer fees by calculating how much interest and fees you are currently paying each month.

Secondly, before you sign your loan contract, make sure you understand all of its terms, including your repayment schedule, the interest rate charged, and any other fees that may be necessary. You will have a legal obligation to fulfil the terms of the loan contract once you have signed it.

Next, work out a clear plan for how you will be able to afford the monthly repayments and assess your financial situation to determine whether you can handle the loan.

Remember that if you don’t make timely repayments, late payment fees and interest will apply.

Choose The Right Debt Consolidation Plan Money Lender

The main advantage of debt consolidation is that it allows you to organise your budget more affordably.

This is because the consolidation loan interest rate should be significantly lower than the total interest you were paying previously. If you’re thinking about debt consolidation, talk to your lender about your options.

While banks also provide this debt management plan, their processes are time-consuming, lengthy, and demanding.

However, with authorised money lenders in Singapore, the application process is simpler. The approval process is also comparably faster with a debt consolidation plan money lender.

Although debt consolidation loans make repayment convenient and affordable, the interest rate is the most crucial aspect that you should take into account before applying.

Are you in need of a debt consolidation plan in Singapore? 1AP Capital, a licensed money lender, will assist you in restructuring your loans into manageable installments.

Contact us now or apply for a consolidation loan with us today.

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