Debt consolidation: What is it, and why you should do it

Have you ever felt overwhelmed by different on-going debts and liabilities and unsure over which ones to pay off first? One good illustration is your credit card bill. Let’s say you have four different credit cards already maxed out and they charge a 20% annual percentage rate. If you were to pay off these credit cards separately, imagine the amount of interest you’ll be paying over a year!

 

This is where a debt consolidation loan comes into play. If you transfer the total balances of the four cards into one consolidated loan at a lower interest rate of 10% and lower, just think how much you will be saving on interest every year!

 

How does a debt consolidation loan help you?

 

To put it simply, debt consolidation is taking out a brand new loan to combine all your other debts on a single loan plan, usually at a lower interest. All the debts you have currently will be paid off by the loan company, be it a bank or licensed money lender, although that does not eliminate your original debt but simply transfers your debt to a different lender. This is especially useful if you do not qualify for bank loans, or if you are unable to apply for one.

 

If you’re struggling to keep track of many different types of loans, their repayment due dates and interest rates, putting it all into one loan makes your life much easier.

 

Lower interest rates

 

Most credit cards will have an interest rate of over 20%, in comparison with an estimated 8% or lower interest rate of a debt consolidation plan. The interest you can potentially save over a long term is a huge amount, since the interest saved can go into your repayments instead.

 

Who is eligible to apply for Debt Consolidation Loans?

 

  • Singapore citizens and Permanent Residents;
  • You should have an annual salary of between $20,000 and $120,000;
  • Your net personal assets should not exceed $2 million;
  • Your current outstanding debt must be at least a certain amount, depending on which financial institution you decide to apply with.This is usually 12 times your monthly income.

 

What kind of debts cannot be consolidated?

 

If you plan to consolidate your debts, keep in mind that not all debts can be consolidated under a plan. Debt consolidation plans are meant for unsecured credit, which does not include secured loans such as car and housing loans. On top of that, if you have a loan that serves a specific purpose, for example medical, education, business or renovation loans, they cannot be consolidated under a debt consolidation plan either. Therefore, be sure to always ask before you sign for any plans to avoid disappointment!

 

In cases where you are unable to get an approval from a bank, head over to a licensed money lender instead! Remember, always only use licensed companies! Here at Soon Seng Credit (Reg no. 201901887G), we are a licensed money lender strictly regulated by the Ministry of Law’s Registry of Moneylenders. We offer lower interest rates and fast approval as fast as 30 minutes, and one day for business loans! No more fretting over which debt to pay off first, as you’ll only have to worry about one consolidated debt!

 

Keep in mind that although a debt consolidation loan may reduce your payment and interest rate, there may be additional fees. Not to worry, here at Soon Seng we are fully transparent with our fees as well, you’ll know what you are paying for before you commit! Drop by our store or contact us at +65 6292 5693 to enquire about our rates and procedures! Alternatively, visit our website and leave a message for us to assist you further!