Have you ever felt overwhelmed by many ongoing debts and liabilities? Unsure of which ones you should 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 28% in annual interest. If you were to pay off these credit cards separately, imagine the amount of interest you’ll be paying over a year!
Or if you have multiple personal loans or several payday loans and are struggling to repay all of them on time without incurring high late interest.
This is where a debt consolidation loan comes into play.
If you combine all your loans into one consolidated loan at a lower interest rate, just think how much you will be saving on interest every year!
Here, we will share more about debt consolidation loans and how they can be useful for you.
What is a debt consolidation loan?
A debt consolidation loan involves taking out a brand new loan to pay off your consolidated multiple debts. It streamlines multiple debts into a single loan, usually at a lower interest.
With a debt consolidation loan, all eligible debts you currently have will be paid off by the loan company, be it a bank or licensed money lender. It does not eliminate your original debt but simply transfers your debt to a different lender.
If you’re struggling to keep track of many different types of loans, their repayment due dates, and repayment amounts, putting them all under one loan can make your life much easier.
Why should you take a debt consolidation loan?
1. Lower interest rate
A debt consolidation loan usually has a lower interest rate as compared to the interest you are paying for your existing loans. Hence, by consolidating your loans, you are paying less money in interest.
2. Convenience: You only need to repay one lender
Instead of stressing out about repaying multiple loans on time, you just need to repay one single lender once your loans are consolidated.
This makes your loan and repayment schedule much easier to manage.
3. Reduced risk of incurring late interest and fees
As a debt consolidation loan consolidates all your loans with a single lender and makes it much easier for you to repay your loan, you will likely be able to repay your loan on time.
This reduces your risk of incurring late interest and fees, which can happen if you are struggling to juggle multiple loans and repayment deadlines.
With debt consolidation, if you can manage your budget well and set financial goals for yourself, you will be able to become debt-free sooner than you think!
Who is eligible to apply for Debt Consolidation Loans?
If you are taking a debt consolidation loan with the bank:
- You must be a Singapore Citizen or Permanent Resident;
- 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 12 times your monthly income.
If you are taking a debt consolidation loan with licensed money lenders, the requirements are less stringent.
You need to be a Singapore Citizen, Permanent Resident, or foreigner with a valid Employment Pass, S pass, or Work Permit and residing in Singapore. You should also be at least 18 years old.
- Proof of identity (NRIC or passport)
- Employment Pass / S Pass / Work Permit (for foreigners)
- Proof of income (CPF contribution statements, IRAS statements, etc)
- Past 3 months’ payslips or bank statements
- Proof of residence, such as phone bills or tenancy agreement (for foreigners)
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, so they can’t be used for secured loans such as car and housing loans.
On top of that, if you have a bank 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 any loan plans to avoid disappointment!
Can’t get a debt consolidation loan from a bank? Soon Seng Credit can help you
If you are unable to get approval from a bank, head over to a licensed money lender instead.
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 are one of the top licensed money lenders in Chinatown.
We can offer you debt consolidation loans even if you have a bad credit history. Our interest rates are competitive and you can get your loans approved in less than 30 minutes if all necessary documents are in place.
Work towards becoming debt-free with a debt consolidation loan now.