Personal Finance

What Is A Money Lender Debt Consolidation Plan?

November 5, 2022

Spending a large portion of your paycheck on high-interest debt can make it difficult, if not impossible, to achieve your financial goals. It can take a long time to pay off the debt, no matter how much is owed.

Debt consolidation is one strategy you can consider to manage multiple monthly payments. For instance, a debt consolidation loan from a debt consolidation plan money lender combines all your existing loans into a single loan.

After you take such a loan, you will make a single monthly payment rather than many interest-bearing installments at different intervals during the month.

What Is A Debt Consolidation Plan?

In Singapore, you can use the debt consolidation plan (DCP) to refinance your debt from multiple lenders into one manageable monthly payment to one institution.

As a DCP is a loan product sanctioned by the Monetary Authority of Singapore, some banks may impose stricter income limits, and grant or deny applications as they see fit.

If and when your application to a bank gets rejected, you can approach a debt consolidation plan money lender.

When you are approved for a debt consolidation plan, your other unsecured credit lines will be frozen or closed.

Your monthly income will determine the size of the revolving credit facility offered by the approved financial institution. When it is easier to manage your debts, you’ll have an easier time purchasing daily necessities.

How It Works

When your application is approved, a debt consolidation plan money lender pays off all your existing debt in one lump sum payment.

The loan is repaid over a set number of months based on the terms initially agreed upon by you and the lender.

Obtaining a debt consolidation loan is the most effective method for dealing with a substantial amount of credit card debt.

Consolidating all your debts into a single loan will simplify your finances by reducing the number of payments you need to keep track of.

What A Debt Consolidation Plan Can Be Used For

Here are some ways you can use a debt consolidation plan:

Credit Card Loans

Credit card loans are unsecured, which means you can consolidate debt loans using a DCP. When you repay your credit card debt, it also allows you to build your credit score.

Unsecured Personal Loans

Unsecured personal loans are relatively easy to get from licensed money lenders in Singapore.

But if these loans are mismanaged, your debt can pile up, and may even amount to 12 times that of your monthly income. This is when a debt consolidation plan will come in handy.

Credit Lines

These flexible loans enable you to access easy credit as and when needed. If you are having trouble repaying your credit line, you can apply for debt consolidation to reduce your debt burden.

What It Excludes

Although a debt consolidation plan can be a helpful tool, certain types of loans cannot be consolidated into a single payment.

As debt consolidation plans in Singapore only cover unsecured loans, they do not cover secured loans such as car and mortgage loans.

But this does not mean that a debt consolidation plan can be used for all unsecured loans. Some examples of unsecured loans that a debt consolidation plan can’t cover include:

Business-related loans
Education loans
Medical loans
Renovation loans

Eligibility Criteria

In order for you to qualify for a debt consolidation plan, you need to:

Be a citizen or permanent resident of Singapore

Earn an annual salary of $30,000 to $120,000

Have less than $2 million in total personal assets

Have a total unsecured debt of more than 12 times your monthly salary comprising credit card debt and other loans with interest

What To Consider Before Applying

It’s advisable to research the prerequisites for a debt consolidation plan before applying for one so you don’t incur additional fees.

A 5% Charge Applies To Your DCP

Once your debt consolidation plan is approved, the sum will include all your debts, any accrued interest, plus 5% more.

Do not be surprised by this 5% increase. The bank or money lender that processed your loan application did so accurately. This 5% serves as a cushion for the lender.

The additional fee will cover any charges incurred during the period it took to process your debt consolidation application. It is paid directly to the lender.

Period To Finance With Another Institution

You have three months to wait before you can refinance your loan with another bank if you want to look for another debt consolidation plan money lender.

Suspension Of All Unsecured Credit Facilities

After a debt consolidation plan is in place, you will no longer have access to any of your existing credit and will be unable to apply for any new lines of credit. But you should find it less challenging to meet your financial obligations.

Alternatives To A DCP

As a result of the stringent restrictions imposed by banks, it might be challenging to acquire a debt consolidation plan.

Don’t lose hope if you’ve been turned down for a loan – a reputable and licensed debt consolidation plan money lender can assist you in working out a repayment plan.

Licensed money lenders are known to be flexible and swift in approving loans, and less strict with eligibility criteria and paperwork than banks.

So it is more likely that you will be approved for a loan from a money lender than a bank.

Here are other benefits of using a regulated money lender like Credit Thirty3:

Capped interest rates
Bound by rules and regulations of the Moneylenders Act
Loans are granted according to your annual income
Hassle-free method of application
Quick turnaround time
Easy acceptance

Choose The Right Debt Consolidation Plan Money Lender

You now know how debt consolidation plan money lenders work. The more debts you have, the more payments you have to make every month.

So it makes sense to consolidate them into one loan with a lower interest rate. It might take longer to repay your debt, but it will definitely make it easier for you to handle.

For more information on debt consolidating plans, visit Credit Thirty3.