Having multiple loans to pay off at the same time can be quite overwhelming, what with the many due dates and payments to keep track of. Suppose this is your situation at the moment. In that case, you might want to consider opting for debt consolidation – the process of combining multiple debts into a single, larger loan with usually more favourable terms.
For some, debt consolidation may seem like a new concept – fret not! Below, we outline four things most individuals are unaware of when it comes to a debt consolidation loan;
1. A debt consolidation loan can reduce your interest rates
Although taking on another loan to pay off your existing debts may sound counter-intuitive, a significant advantage of taking a debt consolidation loan is that it allows you to consolidate your debts at a much lower interest rate in general.
In essence, consolidating your debts can save you a tremendous amount of cash in interest payments and help you pay off your debts quicker. This is due to the fact that you can use the money you have saved by paying less interest to maximise the monthly repayments of your debt consolidation loan instead.
2. A debt consolidation plan allows you to choose your loan tenure
In Singapore, the minimum monthly payment for most credit cards is 3 per cent of the outstanding balance. Should you not pay the necessary amount, you can be charged with late payment fees, which can eventually place you into a vicious cycle of debt.
To make your monthly payments more manageable, consolidating your debts under a debt consolidation plan (DCP) is highly advised, as it can give you the freedom to choose your preferred loan tenure. If you would like to minimise your monthly repayment amount, you can make your loan tenure longer under a DCP. However, having a longer loan tenure entails that you will be paying more interest over time. Hence, if you have the ability to make higher repayments per month, then it would be best that you do so to avoid increased interest charges.
3. There are requirements to qualify for debt consolidation
While consolidating your debts can be a beneficial way to clear them off, it might not be the best solution for everyone. To be eligible and approved for a debt consolidation plan, there are some requirements to be met, namely:
- Being a Singapore citizen or a permanent resident in the country.
- Earning between S$30,000 to S$120,000 annually.
- Having total interest-bearing balances concerning unsecured credit facilities with financial institutions in Singapore that exceeds 12 times your income per month.
Apart from meeting the requirements above, it is imperative that you assess whether or not you have the ability to stay debt-free after paying off your debt consolidation loan successfully since the primary purpose of the loan is to essentially keep you out of debt.
4. Debt consolidation is available at 14 major financial institutions and several approved debt consolidation companies in Singapore
If you are considering a debt consolidation loan, there are 14 major financial institutions in Singapore that currently offer debt consolidation plans.
These institutions are:
- HSBC Bank
- Standard Chartered
- American Express
- HL Bank
- Bank of China
- Diners Club
Each financial institution comes with its own set of charges and fees. Thus, to ensure the debt consolidation plan you take is the right choice, it would be best to do your due diligence in comparing as many plans from these institutions as possible.
Aside from the institutions mentioned above, there are also several reliable and approved debt consolidation companies you can seek assistance from, such as us here at Orange Credit. As licensed money lenders, we dedicate ourselves to providing you with the most helpful and favourable loans depending on your needs.
Consolidating your debts can increase your capability of paying off your debts by providing you with more favourable terms. However, prior to taking on a debt consolidation loan, it is essential that you first understand how debt consolidation works and where to get the loan that is right for you.
If you find yourself in a situation where you require financial assistance, you can always consider turning to legal money lenders, such as Orange Credit, to give you a helping hand. As a trusted Geylang money lender and an approved debt consolidation company, we are equipped with various quick, flexible, and easy loans in Singapore for your every need. Contact us today to learn more about our services.