The Dos And Don’ts: Your Guide to Debt Consolidation Plans

Without a doubt, Singapore continues to develop at a rapid pace. And with such a swift development brings along with it an increase in the cost of living. The overall consequence is that most people enter an endless cycle of debt, either knowingly or unknowingly. For some, it may be a car loan, an education loan, or a home renovation loan, while for others, it may be personal loans or credit card loans.

These loans by themselves are not bad, but your inability to pay what you owe at the appropriate time can attract additional charges. One of the ways Singaporeans manage their debt is by using debt consolidation plans (DCP). In this article, we will explore some of the dos and don’ts when applying for a debt consolidation plan in Singapore.

Dos

  • Search for the lowest interest rates

Longer loan tenures tend to come with higher lifetime interest rates. This means that even as small as 0.5% in interest will contribute to a significant difference in the overall amount you pay at the end of your tenure. And since you can find consolidation loans in Singapore at many banks and lenders, each plan’s interest rates will vary.

Before you apply for a DCP, it’s recommended to shop around and look for plans with lower interest rates, especially when you anticipate longer loan tenures. Besides the low-interest rates, some DCP institutions provide promotions on their interest rates, complimentary insurance, and additional features that are meant to make you save some money. Although these are not sufficient incentives to make you choose a DCP plan, they may help you decide on what to go for once you have narrowed your list of options.

  • Change your spending habits

DCPs by themselves are not a fix-all solution to your debt crisis. What they do is help you consolidate your debt and make the payment of your debts relatively easier. Thus, it’s advisable to learn more about financial basics so that you don’t accumulate more debt when your overall goal is to get rid of it in the first place.

Getting started with easy money habits such as living within or below your means and setting reasonable financial resolutions can help you on your journey towards a debt-free life. Overall, DCPs will not magically make your debts disappear. It is important to learn how to create and implement a budget, as well as how to be responsible with your credit.

Don’ts

  • Don’t miss a payment

Missing a payment will always attract additional interests and fines. Once you apply for a debt consolidation loan in Singapore, use a DCP calculator to determine the amount you will pay every month. Then, you can create a budget around such payments to ensure that you don’t default in your payments. The consequences of defaulting a DCP payment are always dire, depending on the institution that provided you with the DCP.

  • Don’t apply for a new credit line beforehand

A restriction that comes with DCP is that once your request for a plan is approved, you will not be able to use any of your credit cards or other unsecured loans. These will either be closed or temporarily suspended until the tenure of your DPC has ended.

As such, refrain from applying for one last loan since not only will it be prematurely suspended, but it’s also counterintuitive to the primary goal of clearing all the debt incurred. However, DCPs always come with credit bundles that will help you cover your daily expenses or any emergency. Thus, there’s no need to use such credit facilities.

Conclusion

Debt consolidation loans are offered by an abundant number of financial institutions in Singapore. But before choosing the first option presented to you, it’s crucial to keep in mind the dos and don’ts covered above before and after you’ve successfully acquired a plan that fits your needs.

Most people rely on DCPs to help manage their debt problem. However, do remember that DCPs don’t magically save you from the jaws of debt. Only by being financially responsible and aware of one’s credits can one live a worry and debt-free life.

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