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Is The Debt Consolidation Plan Right For You?

Is The Debt Consolidation Plan Right For You?

The Scheme for Repayment Assistance (RAS) expired in December 2015, following which a new one was launched in January 2017. This new scheme is aimed at helping individuals who are over-indebted to pay off their unsecured loans with ease. The new scheme is known as the Debt Consolidation plan (DCP) and 14 Singaporean moneylender institutions will be joining the scheme. Using the new scheme, a potential borrower is now able to pull together all their unsecured outstanding credit across the 14 participating money lending companies and all under one institution.

Therefore, it means that the moneylender institution that manages the DCP “buys over” the borrower’s outstanding debts from their existing accounts they hold with other money lenders. This, in turn, will help the borrower reduce their debt repayment commitments for every month.

How the Debt Consolidation Plan Works

To help show how the Debt Consolidation works, let’s look at how it is going to work for Harry who makes $3,000 in monthly earnings. He currently has an existing debt totalling $30,000:

 

Total repayment for each month = $1,609.9

With the rates, Harry has a hard time trying to keep up with the payments for each month since it takes up too much of his salary, and this is also before the rates of interest are compounded. Making use of the debt consolidation scheme here will help him pull together all the three debts into a single one. This will, in turn, help him concentrate on the repayment of only one debt instead of getting overwhelmed by the 3.

Given that Harry is able to obtain a debt consolidation plan for a period of 6 years from HSBC. Also, let us look at how this matches up to his present commitments:

 

Interest savings in 6 years using the DCP = $5,424.01

As shown above, from the illustration, the amount of money in savings that Harry is able to get when using the DC scheme is rather substantial. In addition, the repayment plan will make his repayments for each month a lot more manageable as well, thus reducing the figure from $1,609 to only $616 for each month.

Different Money Lenders Offer Different Rates of Interest

It is important for potential borrowers to bear in mind that as the DC scheme is individually managed by every one of the 14 money lending institutions, thus the rates of interest fees and charges will differ. Therefore, it is suggested that you take the time to research through the different rates each of the participating lenders offers. This way you will be able to pick out the best for your financial needs.

Here is a look at interest rates currently charged by some of the participating financial institutions:

Effective Rates of Interest Promo Interest Rate (EIR) Charges & Fees Additional credit facilities
HSBC 14.1 to 15.7% 8.5% plus $100 cash back + waiver on processing fee – 1% Processing fee on loan amount- Early payment charges of 3.9% on redemption amount- 2.5% Late payment interest + current interest on any overdue amount – Enjoy packages and benefits with the HSBC Visa-Platinum card- Credit cap equal to your monthly earnings
DBS 9.8% and above – processing charges of $99- Early repayment fee of 5% off the outstanding loan – Late charges: $90 DBS VISA Card giving 1x credit limit
UOB 10.72% and above – the first year 5.27% when you take a 60 months period- Get a $600 shopping voucher when your DCP total is above $75,000 – Not available on the website Complimentary Visa Platinum Credit Card
Standard Chartered 9.55to 11.77% – $199 joining charge- Early redemption charge of $250 or 3%- Late repayment fee of $80 additional Platinum MasterCard holding a credit maximum value of up to 1x your monthly pay
for daily use
Maybank 8.48% and above Between 1 March – 30 April 2017, get S$388 Cash Rebates once your Maybank DCP Loan is approved. Only Limited to first 300 qualifying Customers.  – Not available on the website Credit Card totaling 1X your monthly wages for daily necessities that you access via Debt Consolidation plan

 

How To Qualify For The Debt Consolidation Plan

In order for you to qualify for the DCP, you have to meet the following requirement. These include:

  • You must be a Singaporean or be Permanent Resident;
  • You need to be Earning above S$20,000 and less than S$120,000 each year with a personal Asset Net of below $2million, as well as
  • You need to have interest earning unsecured debt on all your credit cards as well as unsecured credit facilities through money lending institutions in Singapore that is more than 12 times your monthly salary.

Is Debt Consolidation Plan the Right Choice for You

When you at present hold several debts with interests that are much higher than those being offered on the DC scheme, it then make more sense to request for the DCP. Some of the key benefits you get to benefit from being that you get to enjoy a considerable amount of savings in interest, thus putting a stop to the buildup of the compounding interests on the existing debts. And finally, you get to have easy to manage monthly repayments.

Conclusion

The DC scheme is aimed at helping individuals who are over-indebted to repay their unsecured loans with ease. The DCP “buys over” the borrower’s outstanding debts from the existing accounts they hold with other moneylenders. Every one of the 14 money lending institutions charges different interest rates fees.

Benefits of the DCP include you get a considerable amount of savings in interest, thus stop the buildup of compounding interests on existing debts. And you have easy to manage monthly repayments.