Is a Debt Consolidation Plan Right For You?

Is a Debt Consolidation Plan Right For You?

When you have a lot of debts at hand, it is always best to get it all consolidated into one massive debt to make it easier to pay.

If you have credit card debts or other debts with high-interest rates all at the same time, you may find it difficult to manage your financial situation and pay them off. Once the interest rates increase, the more you are unable to pay the balance and paying off one bill out of the multiple ones you have can be tricky to do. If things go out of hand, it may look impossible to confront and pay off without some professional help.

In Singapore, debt consolidation plans have been introduced in 2017 to help Singaporeans and permanent residents who are under multiple unsecured debts. The DCP would help them manage these debts better, consolidating it in one bill, and make it easier to pay. You can also pay smaller monthly payments once your debts have been consolidated into one and extend your payment terms up to 10 years.

Unfortunately, debt consolidation does not work for everyone and it may even be complicated to apply for.

If you are considering DCP, here are the things you have to be aware of to help you decide:

  • Are you qualified?

Under the current rules of DCP, not everyone can apply for it. If you wish to be qualified for this plan, you must be:

A Salaried Employee:

DCPs are allowed for salaried employees with an annual income of at least $30,000; but, not more than $120,000. Banks vary in terms of their income requirements and it can be higher in some instances if a borrower seeks their DCP option. You must also have a personal asset worth less than $2 million to qualify.

Has Unsecured Debts Worth of at Least 12 Times Your Monthly Income

DCPs are created to help those who are having troubles with their unsecured debt. If your debts have reached around 12 times your monthly income – from credit cards, personal loans to other unsecured credit. If your unsecured loans are educational or business loans, you cannot apply for DCP.

If you qualify, you must bring your credit card or loan statements. You should also present a confirmation letter that shows all your unbilled and unpaid balances.

A Singaporean or Permanent Resident

Currently, the DCP is only open for Singaporeans and permanent residents.

  • What is the monthly payment?

If you pass the requirements for DCP, you need to check the amounts you need to remember and see if the DCP will indeed help you out.

Check how much you earn every month; how much you are currently paying and see how much you will need to pay if you applied for DCP. You should then ask yourself if your DCP payment will be 50% lower than what you are currently paying now.

If it will be lower than the current total monthly payments you are paying for, then it is ideal to get the DCP. However, since the payments will be lower every month, you will need to pay your loan payments for a long time and you will still need to contend with interests.

  • How much is the interest rate?

Aside from looking into your monthly payments, check all the interest rates of all your loans and compare it with the interest rate and tenure of DCPs. Just like moneylenders, if your DCP is longer, the amount you need to pay monthly is smaller. However, smaller monthly will mean higher interest. If your DCP is shorter, the amount you need to pay monthly is larger but comes with a low interest.

If you wish to get DCP, you should get it if you will pay less interest and enable you to pay your debts faster. You should also make sure that your DCP can be adjusted to match your current financial capacity.

However, if your outstanding debts scattered across various moneylenders or credit groups come with an overall interest rate of less than 10.5% per annum, a DCP is not necessary. If you can manage your accounts, you do not need to pay more on interest and get a long payment option.

  • Will my debts be forgotten?

DCPs are not designed to forgive you of your debts or reduce it.

It is there to help you pay off your debts and make it easier to pay. Even if it consolidated all your debts into one, you still owe the same total amount you borrowed before it was consolidated into one big account.

Just like how you need to handle personal loans, you need to pay your monthly repayments on time or else you will be facing penalties and fees. Legal action and annotations may also be imposed upon you, which may reduce your chances of applying for the same solution again.

While you are under DCP, take the time to consider how you can sort out your money problems and decrease how you spend. DCP is not always available depending on your circumstances so if you find yourself in the same predicament, it may be difficult to escape debt the second time around.


Being in debt is not a funny business, especially if you have multiple ones that you cannot pay. As a borrower, you have a responsibility to borrow what you can pay and pay it immediately. However, if you find yourself in a bind, make your research first to see which solution can help you clear your debts faster. A DCP will be able to help you pay off all your debts and make it more manageable to handle. With some research, you can customize your DCP to match your needs and capacity to make it easier to pay off your debt.

If DCP is not ideal for you or if you remain uncertain about your options, don’t be afraid to ask and seek professional help because the more you remain in debt, the more difficult it is to be free from it!

Good luck!

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