What Are the Main Benefits of Debt Consolidation Loans?

In Singapore, a significant percentage of adults under the age of fifty are currently dealing with outstanding loans with a significant impact on their long-term financial prosperity. According to a study conducted by IPS, no less than 67.5% of the population of our country currently manages a monthly debt obligation in their name, with mortgages and credit card debts being the most wide-spread type of credits issued to SG nationals.

The liberalization of the private-loan market in SG, and the strict eligibility thresholds imposed to borrowers, make credit packages a viable option for significant percentage of our state’s population. So, the popularity of loans, either from traditional banks or private lenders is continuously rising. But there is a catch. For many, ongoing debt has become a significant issue, and the accumulated interest rates of the contracted financial aid packages has become a monetary burden, that doesn’t allow for significant personal financial growth.

Are you currently facing a case like this? Are you dealing with difficulties in paying off your monthly debt, and do you want to consolidate your ongoing credits into a singular payment package? In that case, like many, you should consider debt consolidation loans. At least in Singapore, debt consolidation plan refinance is the most effective way to reduce the snowballing effect of ongoing debt, improve credit rankings, and consolidate current payment plans without impacting your short-term or long-term finances. Are DCLs a solution for everyone? Not always. But at least in this economy, they are one of the most versatile financial instruments available to borrowers.

How Can You Use Debt Consolidation Loans?

Like the name suggests, long-term debt consolidation loans are flexible financial instruments that are primarily used to merge unfavorable ongoing credits into singular loans with more advantageous interest rates. The way it works is quite simple actually. The private lender you collaborate with will offer you a cash infusion that covers the remaining balance of your ongoing loans, so you can pay them off, interest and all.

However, once this is taken care off, you will remain with a single (larger) credit package, that should technically be easier to pay off. Why is that? Well for one, the interest rate of the DCL will be lower than those of your old credits. Plus, since the duration of a DCL usually spans more than a year, your monthly payments will in almost all cases be easier to manage.

Sure, in the long run, the debt consolidation plan refinance will probably cost you slightly more than just continuing paying off your remaining debt. However, this is not always the case, as the total cost of the DCL will be dependent on the interest rate offered by the lender and the repayment period that’s settled on. That said, in all cases, the monthly payments will be easier to manage, and your risks of economic default will be significantly lower. Plus, since we are talking about a singular credit, DCLs are easier to administer than multiple ongoing loans, and their utilization can free up the limits imposed on your credit cards or improve your credit score.

What Paperwork Is Required for Debt Consolidation Plan Refinance?

It depends from lender to lender, but generally, in order to apply for debt consolidation loans in Singapore, you will be required to present proof of your ongoing income and a copy of your National Registration Identification Card. Are you a foreigner? In that case, the lender you are applying to will need access to your employment pass or work visa.

Contrary to popular belief, DCLs are not exclusive to SG nationals, and are also an option to consider for foreign residents with ongoing debt accumulated domestically. But, yes, most often these financial reconfiguration packages are offered to SG citizens. If you started your work activity less than three months ago then, in most cases, the lender you collaborate with will want a digital copy of your employment contract. Moreover, if you are self-employed, then you will likely be required to submit your latest income notice of assessment (also known as a tax bill).

The documentation required for your application will not be that different from the one necessary in other types of loan packages. The lender, for example, will perform a CBS report in your name, and assess your case based on the credit score that comes up. However, one thing that is different in DCL applications is the necessity of debt statements that show all your outstanding debt balance, regardless of financial institution, credit type or repayment terms.

How Is Debt Consolidation Plan Refinance Different?

First and foremost, debt consolidation loans are not personal, unsecured credits that can be utilized for everything from the purchase of goods and services to investments or clearing up medical bills. DCLs, are exclusively utilized to secure your existing debt obligations into a singular, more manageable monthly package that usually is accompanied by more flexibility when it comes to interest rates. What rates are we talking about? It depends on lender and the circumstances surrounding your application. That said, as a general rule, DCLs APRs are significantly more lenient than the ones applicable to credit cards.

Plus, DCLs are granted on the assumption that they will be used to pay-off your existing debt. With a personal loan, however, this is not the case, as you can accumulate as much debt as you need as long as you have the finances for it and you credit score remains at an acceptable level. How much debt is required for a DCL? Again, there is not fixed upper or lower limit, but as a general rule, most lender will consider your application for a debt consolidation plan refinance if your total debt exceeds more your total yearly income.

Are they for everyone? No, not always. For some individuals, debt consolidation plan refinance might come with eligibility criteria that’s hard to overcome, and it’s a solution that only works if the borrower is willing to work on its financial discipline. However, by and large, it is probably the best solution for borrowers who are simply looking to improve their cash flow and make their monthly payments a little easier to manage.