Combine all loans into one: What is a debt consolidation loan and how does it work?

Living in Singapore can be challenging at times with high expenses and bills to pay.

Some of you might be struggling with debt, or have taken on multiple loans to pay off your debts.

With different payment deadlines to manage, this can be stressful to deal with, especially if you can’t repay on time and chalk up late payment fees.

One potential solution is to combine all loans into one through a debt consolidation loan.

What is a debt consolidation loan?

A debt consolidation loan allows borrowers to combine all loans into one single loan as a way to refinance their debts across various financial institutions.

A debt consolidation plan is only available for unsecured loans like credit cards and personal loans that don’t require any collateral. Once all your loans are combined, you will only have to concentrate on paying off a single debt consolidation loan with one financial institution.

There are no longer multiple repayment deadlines to take note of. Debt consolidation loans also generally have better repayment terms such as lower interest rates.

Where can you get a debt consolidation loan?

Debt consolidation loans are available at several financial institutions in Singapore including banks and licensed money lenders.

Some well-known banks that offer this plan are DBS, HSBC and Citibank. Licensed money lenders are also authorised to offer debt consolidation loans.

Who is eligible for a debt consolidation loan?

Depending on the financial institution you approach for a debt consolidation loan, there may be slightly different eligibility criteria.

Eligibility criteria with banks

Banks only offer this scheme to Singapore Citizens or Permanent Residents. Borrowers are expected to be earning an income between $20,000 and $120,000 per annum and their total assets excluding liabilities should not amount to more than $2 million.

Lastly, their total loans including interest from all partnered financial institutions in Singapore should exceed 12 times their monthly income.

Eligibility criteria with licensed money lenders

A debt consolidation loan eligibility from licensed money lenders may differ based on the amount and type of debt you have.

Generally, money lenders offer loans to individuals who are at least 21 years old and residing in Singapore (citizens, permanent residents or foreigners with a work pass). Borrowers are expected to have a steady monthly income to be able to support their loan repayment. The amount you can borrow will also depend on your monthly income and total debt sum.

Why should you go for a debt consolidation loan if you have multiple loans?

Get out of debt more quickly

A debt consolidation loan usually incurs lower interest rates compared to your existing individual loans. The extra cash that you are able to save up can be used to pay off your debt consolidation loan, which can expedite your repayment so that you can clear your debt more quickly.

Pay off loans with a lower interest rate

A debt consolidation loan is known for having lower interest rates than the average personal loan but you should always compare the rates and loan terms of different financial institutions to get the best bang for your buck.

Debt consolidation loans can really save you extra cash in the long run especially if you refrain from extending your loan tenure and are diligent in paying off your loan on time.

Only manage one repayment deadline with a single lender

When you combine all loans into one, you streamline your debts to make your life a lot less stressful. One single loan is much easier to repay as compared to multiple loans, as you will just have one set of loan repayment dates to remember.

Do you need a debt consolidation loan?

If you are struggling to juggle multiple loans and debts, you can apply for a debt consolidation loan with us to lessen your financial load. At Prosper Credit, our loans are catered to each individual’s needs.

Apply your loan with us today.