Guide to Debt Consolidation Plan Singapore

0
2290
debt consolidation plan singapore

After the great Recession hit the world, Singapore was also among the affected ones. This led to increase in debt/ borrowers to twice from year 2004 to 2014. People have submerged themselves into debt and want to get out of it but do not know how they should proceed. Do not worry, we bring you some of the great ways to help you come out of the vicious circle of Debt.

How You Can Get Out Of Debt Faster in Singapore

So, how do you pay off your credit card bills…especially when money is REAL tight?

Work out an agreement with your creditors to pay off your credit card bills at a reduced amount. You’ll be able to pay off your bills more quickly, and the credit card companies will get their money faster.

This process is called debt negotiation, or debt settlement.

Most people don’t know this type of debt reduction is even an option – which is exactly what the creditors want you to think. (You’ll also learn other strategies to help you get out of debt faster.)

But believe me, debt negotiation really does work.

The most important point to remember is that you will NEVER get out of debt playing by the creditor rules.

So take a few minutes to find out how you can pay off your credit card bills faster, and save yourself LOTS OF MONEY at the same time.

If you’re looking for a more traditional way to get out of debt, then debt consolidation may be the answer for you. You might not get out of debt as fast, but you still may be able to lower your interest rates and save yourself a bunch of money!

In Singapore, there is a new scheme call Repayment Assistance Scheme (RAS) where a new centralised repayment solution is administered by Credit Counselling Singapore (CCS). It assists individuals who have accumulated interest-bearing unsecured debt in excess of 12 times their monthly income.

If you want to know more on how it works, visit their website – http://www.ccsras.org.sg/

 

Debt Repayment Options in Singapore

With plans like Debt Management program running since 2004 by Credit Counselling Singapore and debt repayment Scheme by Insolvency Officer, there has been found a new option for all the Singaporeans to repay the loan. The scheme is called as Debt Consolidation Plan helping you to repay your loans/debts much more easily.

So, what’s Debt Consolidation Plan?

Managing your debts would be much easier with the new debt repayment tool called Debt Consolidation Plan started by the Association of Banks in Singapore. The plan started this year in January with an aim to manage all the unsecured loans (Credit Card Loans, Personal Loans etc) of the Singaporeans allowing to merge them into a single loan with lower interest rates. This has to be paid monthly.

Savings from Debt Consolidation Plan.

Let us assume you have$30,000 of unsecured loans , which have to repaid in next 5 years.

Interest Rate

20%-26%

Combined Interest of 5 years

$17,688.99-$23,892.84

Monthly Repayment

$794.82-$898.21

Now, assume you take any Financial Institution Debt consolidation Plan , what would be the difference in Interest amount and the monthly repayment you have to pay?

Interest Rate

11%

Combined Interest of 5 years

$9136.36

Monthly Repayment

$652.27

This shows that around $8552 to $14,756 would be saved in your Interest itself with monthly payment reducing to around $140 to $240.

Vital things you must know about Debt consolidation plans

  • In Debt Consolidation Plan, there will be an additional allowance of 5% or less charged above your unsecured Debt for covering the incidental charges. This makes the total amount to be repaid by Debt Consolidation plan a bit more than your actual Unsecured Debt. This option cannot be eliminated and is mandatory.
  • The Debt Consolidation Plans refers to the credit score/review and any of the banking/financial institution holds the right to reject you for taking up the plan or offer such plans, which has lower value than your unsecured debt.
  • As soon as the Debt Consolidation Plan will be enabled, you would no longer have access to your credit cards, Credit facilities, as they would be invalid.
  • You would not be able to apply for any new Credit facilities till your Outstanding Debt balance is lower than 8times your monthly income or 4times the Financial Institution which you have chosen for Debt Consolidation Plan.

Agree on all, but who all are eligible for it?

The eligibility Criteria for Debt Consolidation plan is-

  • You must hold a Citizenship or Permanente resident status of Singapore.
  • Any salaried employee earning from $20,000 to $1,20,000 annually.
  • If you have Net Personal Assets (Total Assets- Total Liabilities) of not more than $2 Million.
  • Must have unsecured loans of minimum 12 times of the Monthly Income.

Applying for Debt Consolidation Plan

The new Debt Consolidation Plans are at present provided by 14 Financial Institutions of Singapore. You are free to chose any of these 14 Financial Institutions even if you do  not hold any bank account with them. All of them provide a bit different kind of plan so before applying you must compare the plans and zero upon the one, which bests suits your requirement. Here are the 14 banks, which provide the DCB Plan:-

  • American Express International, Inc.
  • Australia and New Zealand Banking Group Limited
  • Bank of China Limited Singapore
  • CIMB Bank Berhad
  • Citibank Singapore Limited
  • DBS Bank Ltd
  • Diners Club Singapore Pte Ltd
  • HSBC Bank (Singapore) Limited
  • Industrial and Commercial Bank of China Limited
  • Malayan Banking Berhad
  • Oversea-Chinese Banking Corporation Limited
  • RHB Bank Berhad
  • Standard Chartered Bank (Singapore) Limited
  • United Overseas Bank Limited

Also read: Things you MUST know about using CPF for Housing Loan

There are certain documents, which you must keep ready before applying for the plan. They are-

  • Last on to date  Unsecured Loans Statements
  • Front and Back Photocopy of the NRIC.
  • Latest Income and Credit bureau Report Documents
  • Confirmation letter showing unpaid Loan balances for your unsecured loans

If do not match Eligibility Criteria, then?

Debt Consolidation Plan is the new repayment scheme but if you do not qualify for it, then there are various others Debt repayment programs wherein you can apply like:-

Debt Management program:- Just like your EMI’s, this debt management program is a monthly Instalment scheme allowing the borrowers to repay the unsecured debts (Principal amount plus Interest) gradually over a period of time. Credit Counselling Singapore offers the scheme where you can apply by attending the free seminar and counselling organised by them in order to ascertain the Financial/economical condition of the borrower.

Vital Things regarding Debt management Program

  • The Free Seminar is a must for application of Debt management program.
  • The reduction in the interest rates depends wholly on the lending banks.
  • Under the Debt management programs, Unsecured loans taking from any financial Institutions or known parties will only be covered, loan from friends and relatives etc will not be covered.
  • It is not necessary for you to hold a citizenship of Singapore for the program.

Other best Alternative to Debt management Program?

The other alternative can be the Debt Repayment Scheme, which is less opted than the other plans. It is mostly taken up by the borrowers who wish to declare themselves as Bankrupt. As you would declare Bankruptcy in this, unlike the other two stated above, this would be on the Public record and not on personal or banking level.

Vital Things Regarding Debt Repayment Scheme

  • As stated above, borrowers have to file for a Bankruptcy application Form in the court after which the court will appoint an OA to check your suitability for the scheme. If the court does not find you suitable enough for Debt Repayment Scheme, you would be announced as Bankrupt.
  • To qualify for the Debt Repayment Scheme, the outstanding Debt Balance must be below $1,00,000, which will be further assessed by the OA (Official Assignee).
  • It will be on Public Record

Getting out of DEBT Fast in Singapore

The most important lesson I learned about getting out of debt is that you’ll NEVER get out of debt playing by the rules of your creditors. No matter what they say, they really don’t want you to get out of debt.

After all, the longer it takes you to pay off your debt, the more money they’ll make.

So trust me, you will NEVER get out of debt by just making minimum payments. Or by paying ridiculously high interest rates…or by paying late fees, over limit fees, or any other fees charged by your creditors.

Side track: Do you know which credit card in Singapore has the most expensive fee for late payment?

Depending on how you use your credit cards, and how much you spend, and how disciplined and controlled you are over your own spending, you may or may not have trouble paying your credit card bills when it comes to the end of the month and the bill arrives in the mail. No matter what your situation is however, there is always one thing you will not, under any circumstances, want to see on your monthly credit card bill, and that is a credit card fee.

There are different types of credit card fee and different reasons for incurring them, but the good news is that many of them can be avoided by simply following a few simple rules and keeping on top of your finances and bills. The most important way to minimise the fees you receive from your credit card company is to pay your bill on time and in full each month. Generally if you do this, you will be charged no interest of finance charges at all, and will be receiving all the benefits of a credit card and over a month of credit absolutely free. If you are one of the lucky customers who can manage to maintain your account in this way, you will be very lucky.

However, many people cannot pay their account in full each month, therefore, they incur the most common of all credit card fees, and this is finance charges. Credit card companies actually charge very high interest rates to their customers so if you have the option of borrowing in other ways that may be cheaper it is recommended that you use these methods if you are planning on needing the money for more than a couple of months.

Another credit card fee is a late fee for when you are late in making your monthly payment. Many people who have more than enough money to make their repayments simply through a lack of organisation miss payments and incur large fees. If you are late in making your repayment because you donít have enough money to make it you may need some debt counselling or other advice to help you manage your way out of this situation.

Here is the bank that charge the highest late fee

OCBC

$100 if the minimum payment is not received by payment due date for OCBC Credit Cards (excluding NTUC Plus! Visa Credit Card and Plus! Visa Credit Card)

Source: https://www.ocbc.com/assets/pdf/cards-fee-charge.pdf

Also read:

Total Debt Servicing Ratio (TDSR) and Loan to Value (LTV) ratio – What is that?

How to Invest your Money in your 20s