Using A Personal Loan To Consolidate Debt

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Using A Personal Loan To Consolidate Debt

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Smart use of credit lines is a useful and strategic financial tool for many. Unfortunately, it can sometimes be a double-edged sword for those who lack the knowledge and temperament to use it wisely – often through no fault of their own.

Just as compounding income drives wealth creation, the flip side—compounding interest on debt—can create a downward spiral that many find very difficult to break out of.

Using Personal Loans For Debt Consolidation

This can be a difficult situation with financial implications. This is why debt consolidation exists and in particular why the Association of Banks of Singapore (ABS) introduced the Debt Consolidation Plan (DCP).

Debt consolidation is the process of taking all of your unsecured debts, meaning unsecured debts like credit cards and personal loans, and putting them into one bucket. The most common way to do this is to take out one loan and use it to pay off all of your outstanding debts.

Now instead of paying different amounts to different institutions every month, combine everything into one monthly payment. This has three main advantages.

● Ease of Tracking and Scheduling: When you have so many different payments to make each month, it can be difficult to keep track of them all. By consolidating your debt into one payment, you know exactly how much you have to pay each month.

Debt Freedom: Consolidate High Interest Credit Balances With The Help Of A Personal Loan

● Potentially lower interest rates: You can often get debt consolidation loans for a lower interest rate compared to your outstanding debts, especially if they include credit card debt. This means you usually pay less.

● Required financial discipline: If you are considering a debt consolidation loan, then you already know that you need to improve your finances and spending habits. By consolidating all your debts into a single, easy-to-track monthly payment, it’s easier to keep up. This is further reinforced by the provisions contained in Singapore’s DCP – which we will examine in detail.

As a financial institution, we are committed to doing good for society. Although loans are important to sustaining the economy, we realize that it is our duty to help those who have not yet learned to use debt responsibly.

ABS introduced the DCP in January 2017. Under this scheme, eligible borrowers can consolidate their outstanding unsecured debt with one participating financial institution, including Standard Chartered. The DCP complements other debt settlement arrangements such as the Debt Management Program offered by Credit Counseling Singapore and the Ministry of Law’s Debt Recovery Program.

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The DCP has been supported by the Monetary Authority of Singapore (MAS), which has already taken proactive measures to prevent excessive debt accumulation. For example, in 2015, the Office introduced measures to manage credit limits, which limit all financial institutions from providing unsecured loans to natural persons with credit exceeding a certain limit.

This limit has been gradually reduced since 2015, and as of June 2019 it is equal to 12 times the monthly income. This means that if your unsecured loans exceed your annual income, you won’t be able to get higher or new credit limits or use existing options.

At Standard Chartered, we do our part by actively participating in the DCP. If you’re struggling with debt, read the infographic below to learn everything you need to know about this plan.

At Standard Chartered we can help you manage your debt with our debt consolidation loans. Click here. Contact us today.

How To Consolidate Debt

Do you feel like you are going into debt? A debt consolidation loan may be just what you need to get your finances in order. Read more about getting a Singapore Debt Consolidation Plan loan here.

Register for the initial assessment with just your NRICs and proof of income and get up to S$500 in cash.

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Are you looking for a debt consolidation loan but don’t know which is better: debt consolidation or a personal loan?

A Complete Guide To Debt Consolidation In Singapore

In most cases, both are suitable ways to borrow and manage your finances, but it’s important to understand the difference between the two.

In this blog post, we’ll go over the pros and cons of each option so you can decide what’s best for your financial situation.

A debt consolidation loan is a personal loan that allows you to consolidate all of your debt payments. Consolidating all your loans will allow you to lower your monthly payments, making it more manageable.

For example, you took out three loans for personal reasons. You will have to pay each one with high interest, which can be difficult.

Debt Consolidation Vs. Credit Card Refinancing: What’s The Difference?

With a debt consolidation loan, you only need to make one monthly payment, which helps reduce interest rates and lighten your burden.

People often don’t understand the difference between personal loans and debt consolidation loans. The misunderstanding arises because a debt consolidation loan is essentially a personal loan, but its purpose is slightly different.

So before answering, which is better – debt consolidation or personal loan? For a better understanding, let’s take a closer look:

As mentioned above, debt consolidation loans specifically allow you to pay off multiple debts or loans in one monthly payment.

Things You Need To Know Before Taking Out A Personal Loan

Debt consolidation is ideal for people who have larger interest-bearing obligations, such as credit cards, and are looking for a simplified payment schedule.

You also cannot pay off a debt consolidation loan before the due date. If you do, you could face penalties ranging from a fixed amount, usually $75, to a percentage of your existing balance or monthly payment.

Personal loans are basically what their name suggests. They can be used for personal expenses such as weddings, education, repairs, car maintenance or even small business needs.

They can also be secured or unsecured loans depending on the type, total amount of the loan and the lender.

Best Debt Consolidation Plans In Sg 2022

They may seem like the best option, but personal loans usually have high interest rates. Most personal loans

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