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Many Singapore citizens have multiple unsecured credit facilities, such as credit cards and personal loans. These debts often come from different banks or financial institutions in Singapore. If you struggle to repay your outstanding balance each month, a debt consolidation plan can help. A debt consolidation loan lets you combine your credit card balances and unsecured loans into a single loan with a lower interest rate.
This repayment plan enables you to reduce your total interest and manage your finances better. You make one fixed monthly repayment amount over a clear repayment period. The loan will disburse funds to pay off your total outstanding balance with other lenders. Your existing credit lines will close or be suspended once the debt is cleared. This move limits your ability to use credit unnecessarily and supports better financial habits. The plan often provides a new credit limit for your monthly income or net personal assets.
How Does Debt Consolidation Affect Your Credit?
While a debt consolidation plan can help manage your debts, it’s essential to understand how it can affect your credit score. When you apply for a debt consolidation loan:
- Credit Inquiry: Lenders will perform a credit check, which may temporarily lower your credit score.
- Debt-to-Income Ratio: Successfully consolidating your debts can improve your debt-to-income ratio, which is beneficial for your credit score in the long term.
- Payment History: Consistently making payments on your new loan can positively impact your credit score over time.
The DBS Debt Consolidation Plan
Credit: DBS Singapore
- Processing Fee: S$99 one-time fee.
- Loan Amount: Covers the total outstanding unsecured balances plus an additional 5% to account for incidental charges.
- Interest Fee: Interest rates start from 3.58% p.a., with an Effective Interest Rate (EIR) of 6.56% p.a., depending on the applicant’s credit profile.
- Repayment Tenure: Flexible tenure ranging from 1 to 8 years.
DBS offers competitive interest rates and flexible loan tenures, making debt repayment more manageable. Additionally, applicants receive a DBS Visa Platinum credit card with a limit of up to one time their monthly income and no annual fee, providing convenience for daily expenses.
HSBC Debt Consolidation Plan
Credit: HSBC Singapore
- Processing Fee: 1% of the approved loan amount, subject to a minimum of S$88.
- Loan Amount: Covers the total outstanding unsecured balances across financial institutions.
- Interest Fee: Promotional rates range from 4.5% p.a. to 8.9% p.a., with EIRs between 8.0% and 14.8% p.a., based on the applicant’s credit profile.
- Repayment Tenure: Flexible tenure ranging from 1 to 10 years.
HSBC’s DCP offers one of the longest repayment tenures in Singapore, up to 10 years, allowing for lower monthly repayments. The plan also provides promotional interest rates and cashback offers, making it a cost-effective solution for debt consolidation.
Standard Chartered Debt Consolidation Plan
Credit: Standard Chartered
- Processing Fee: One-time fee of S$199.
- Loan Amount: Includes total outstanding unsecured balances, with an additional 5% to cover incidental charges.
- Interest Fee: Interest rates start from 3.48% p.a., with an EIR from 6.33% p.a., depending on the applicant’s credit profile.
- Repayment Tenure: Flexible tenure ranging from 3 to 10 years.
Standard Chartered offers competitive interest rates and a generous cashback of up to S$500 upon approval. The extended loan tenure options provide flexibility in managing monthly repayments.
UOB Debt Consolidation Plan
Credit: UOB Singapore
- Processing Fee: Not specified.
- Loan Amount: Covers total outstanding unsecured balances, with an additional 5% to account for incidental charges.
- Interest Fee: Interest rates from 4.50% p.a. (EIR 8.22% p.a.) for tenures up to 6 years; 5.50% p.a. (EIR 9.67% p.a.) for tenures of 7 to 8 years.
- Repayment Tenure: Flexible tenure up to 8 years.
UOB’s DCP offers competitive interest rates and flexible loan tenures, allowing borrowers to manage their repayments effectively. The plan also includes a complimentary Visa Platinum Card to assist with daily expenses.
Citi Debt Consolidation Plan
Credit: Citibank Singapore
- Processing Fee: No processing fee.
- Loan Amount: Includes total outstanding unsecured balances, with an additional 5% to cover incidental charges.
- Interest Fee: Depending on the applicant’s credit profile, interest rates range from 5.95% p.a. to 10.5% p.a. with an EIR of 10.5% p.a.
- Repayment Tenure: Flexible tenure ranging from 1 to 7 years.
Citibank’s DCP offers no processing fees and provides a credit card with a limit of up to one time the borrower’s monthly income. The plan also includes complimentary protection insurance coverage, adding value and security for borrowers.
OCBC Debt Consolidation Plan
Credit: OCBC Singapore
- Processing Fee: Not specified.
- Loan Amount: Includes total outstanding unsecured balances, with an additional 5% to cover incidental charges.
- Interest Fee: Interest rate of 4.50% p.a., with EIRs ranging from 8.06% to 8.41% p.a., depending on the loan tenure.
- Repayment Tenure: Flexible tenure ranging from 3 to 8 years.
OCBC’s DCP offers fixed monthly repayments, making it easier for borrowers to manage their finances. The plan also provides flexibility in choosing repayment tenures to suit individual needs.
How to Choose A Debt Consolidation Plan?
When considering a debt consolidation plan, it’s vital to evaluate your financial situation and the specific terms of each plan. Here are some tips to help you choose the best option:
- Compare Interest Rates: Look for the lowest interest rates available to minimise the cost of borrowing.
- Evaluate Fees: Consider any processing fees and how they impact your overall loan cost.
- Assess Repayment Flexibility: Select a plan with a repayment schedule that fits your budget.
- Check for Additional Benefits: Some banks may offer added benefits, such as financial advice or budgeting tools.
Manage Finance Smarter
Debt consolidation can be an effective strategy for managing multiple debts and improving your financial health. With several options available, Singaporeans have the tools to simplify their debt management. Remember to assess your financial circumstances carefully and choose the plan that best suits your needs. Doing so allows you to regain control over your finances and pave the way for a more secure financial future.
