Struggling to juggle multiple credit card bills and drowning in interest rates? Unpaid loans can feel like a bottomless pit, but there might be a light at the end of the tunnel - debt consolidation.

Let’s check out what exactly is a Debt Consolidation Plan (DCP) before you resign yourself to a lifetime of minimum payments.

What is a Debt Consolidation Plan (DCP)?

A Debt Consolidation Plan (DCP) is a way to combine all your different debts like credit card bills, loans, or other payments into a single debt with one Financial Institution (FI). You just make one monthly payment instead of paying multiple lenders.

This makes it easier to manage your finances because you have fewer payments to keep track of. Often, this plan also comes with a lower interest rate, which can save you money over time and help you pay off your debt faster.

However, DCP excludes unsecured loan accounts in Singapore, such as:

• Renovation loans
• Education loans
• Medical loans
• Loans granted under joint accounts
• Business-related credit facilities

Criteria for a Debt Consolidation Plan (DCP) in Singapore

Here are the criteria needed to qualify for a Debt Consolidation Plan, according to Credit Counselling Singapore:

• Be a Singapore Citizen or Permanent Resident;
• Earn between S$20,000* and below S$120,000 per annum with Net Personal Assets of less than $2 million;
• Have total interest-bearing unsecured debt on all credit cards and unsecured credit that exceeds 12 times of monthly income.

However, here’s the catch - each FI has its own specific criteria for determining eligibility. Even if you meet the general income requirements outlined for the DCP, individual FIs have the discretion to assess your application and decide whether to offer you a plan. This means that different FIs may offer varying terms and conditions, including interest rates and repayment periods, even for applicants with similar incomes.

Individual financial institutions may also set higher income criteria and approve applications based on their assessment.

Comparison of Debt Consolidation Plans (DCPs) in Singapore

If you’re looking to compare Live interest rates between banks and and find the best debt consolidation loan, you can do so at Lendela.

Lendela is a loan matching platform that matches borrowers with personalised loan offers from multiple banks and loan providers, without hurting your credit score or sharing your personal information. This way, banks compete to offer you the best rate while you kick back and wait for the offers to come.

What Happens After You Apply for a Debt Consolidation Plan (DCP) in Singapore

Should your DCP application be approved, existing unsecured credit facilities with other financial institutions will be closed or suspended. Your approving financial institution will then grant you a revolving credit facility, fixed at one time your monthly income to provide you with a convenient payment mode for purchases of daily essentials.

Revolving Credit Facility

Essentially, a revolving credit facility is a flexible line of credit that you can access as needed, up to a pre-approved limit. How does it work? This facility gives you access to a pool of funds that can be used for unexpected expenses or emergencies. You can borrow and repay the amount as many times as needed, within the credit limit. Interest is typically charged only on the amount you use, not on the entire credit limit.

Start Small, Dream Big

Confronting your debt might feel overwhelming, but you have the power to take the first step.

Imagine the possibilities after paying off your loans and bills: vacations you can go for without feeling guilty, a down payment on a dream home, or simply the peace of mind that comes with financial security.

Wouldn’t that feel amazing?

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