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What Is A Debt Consolidation Loan?

What Is A Debt Consolidation Loan?  

At times, you may find yourself saddled with multiple loans, which you must repay during the month. This may make it challenging for you to meet all your payment deadlines.

This is when a debt consolidation loan may come in handy.

If you are wondering what is debt consolidation loan, it is a loan that consolidates all your unsecured loans into one single loan.

This is done with the aim of lowering your interest rates and monthly payments. In other words, a debt consolidation loan makes repaying all your loans an easier task.

This article discusses debt consolidation loans in detail, including their benefits and how you can qualify for one.

What Is Debt Consolidation Loan?

A debt consolidation loan consolidates your various loans into one single loan to be managed under one lender. Such a loan will consolidate debts from different financial institutions.

Credit cards, joint accounts, and renovation loans are among some of the credit facilities covered.

Debt consolidation loans can significantly lower the interest rates you are currently paying, thus reducing the monthly payments you make. This helps you save time and money.

The main point of a debt consolidation loan should be to enjoy a lower interest rate, and secondly to make it easier to repay all your debts with one single loan.

How It Works

When you have multiple debts with various lenders, it is easy to lose track of your payments and miss payment deadlines, which might result in more fees.

Debt consolidation aims to resolve all this. It consolidates your loans from all your debtors to form one loan, which you’ll pay to one creditor over a fixed period. This, in turn, lowers the interest you’ll pay on your loans.

Licensed money lenders offer debt consolidation loans. Some financial institutions offer debt consolidation plans (DCPs), which are different from debt consolidation loans as they are debt refinancing programmes.

What Will Be The Total Debt Consolidation Amount?

The debt consolidation amount will equal your outstanding balance, plus other fees and charges. In addition, a 5% allowance is imposed on your first debt consolidation loan.

The 5% charge can be used to pay for any extra fees or costs associated with the consolidation process.

However, if the debt consolidation plan amount approved is less than your outstanding balance, you’ll have to make up the difference with your own savings or by taking out another loan.

Pros And Cons Of A Debt Consolidation Loan

Pros

Cons

What Documents Do I Need To Qualify For A Debt Consolidation Plan Or Loan?

Now that you know what is debt consolidation loan, here are the documents you need to qualify for such loans.

Debt Consolidation Loans

Singaporeans and permanent residents must:

Foreigners must present their:

Debt Consolidation Plans

Eligibility For Debt Consolidation Plans

To be eligible for a DCP, you must:

Note that a debt consolidation plan cannot be used for:

Where To Get Debt Consolidation Loans

In Singapore, you can get debt consolidation loans from licensed money lenders.

Debt consolidation plans are offered by the following financial institutions:

Other than the listed financial institutions, other institutions may be added or substituted at any time.

You don’t have to apply to all financial institutions – just apply to one. Compare the terms and conditions between different institutions before making your choice.

Decide If You Need A Debt Consolidation Loan

Now that you know what is debt consolidation loan, you can look for the right lender. At CreditMaster, we are committed to addressing your issues as far as debt consolidation plan loans are concerned.

Our experienced professional will help you organise your loans to consolidate debt, making your debts more manageable.

We will help you find a way to lower the interest rates charged on your loans and walk you through the debt consolidation process, ensuring you pay off your debts without struggling.

What’s more, we can offer a money lender repayment plan with affordable installments spread across a fixed period.

Contact us now or apply for a loan with us today.

Frequently Asked Questions

Can I Still Use My Existing Credit Facilities While Awaiting Debt Consolidation Plan Approval?

No. You’re not allowed to use your unsecured credit facilities after you submit your application for a debt consolidation Plan.

The financial institution might approve your debt consolidation plan, yet the amount awarded may be less than what you need to cater to all outstanding debt.

In this case, you are obliged to pay the remaining amount directly to the financial institution.

Also, you’re supposed to pay all extra charges as stipulated under the terms and conditions of the said debt consolidation plan.

Should I Continue Repaying The Outstanding Balances On My Existing Credit If I Have A Pending DCP Application?

Yes, you should continue paying your outstanding balances on your existing unsecured account while your debt consolidation plan application is pending.

When the debt consolidation plan loan is approved, you’ll need to only repay the monthly debt consolidation plan loan repayment amount to the financial institution.

However, suppose the 5% allowance fee is less than the expenses accrued between the time of application and the time the DCP loan is disbursed.

In that case, you’ll have to pay the shortfall directly to your financial institution.

Contact us today for any financial assistance you might need. We promise to exceed your expectations.