How To Get A Debt Consolidation Loan With Fair Credit in Singapore
Although most people try to stay away from spending more than they can afford, there are times when you can’t help it.
In the end, you’re left with different debts to pay and not enough money to pay them. And when you do apply for a debt consolidation loan, your application is denied because you don’t have good credit. This is where it gets tricky.
But luckily, there are ways to get debt consolidation loans with fair credit.
So how can you get started? Read on to find out how to get a debt consolidation loan with fair credit.
What Is A Debt Consolidation Loan?
Let’s take a quick look at how a debt consolidation loan in Singapore works. Consolidating a loan means combining all the loans you owe into one single loan with one lender.
Hence, a debt consolidation loan is a type of loan that combines multiple unsecured debts such as credit card balances or personal loans into a single loan with one monthly payment.
When you consolidate debt loans, you are required to make a single monthly payment instead of the original multiple repayments to different financial institutions.
A debt consolidation loan aims to simplify the repayment process and more importantly, potentially lower the overall interest rate on the combined debt. This makes it easier for you to pay off your outstanding debts. You can get debt consolidation loans from licensed money lenders.
You can apply for a debt consolidation plan (DCP) from financial institutions that offer unsecured credit facilities.
5 Uses Of Debt Consolidation Loans
Here are five uses of debt consolidation loans:
1. Gives You Less Stress
For affordability, debt consolidation loans are largely used when you need to organise your budget (and of course, debts). This gives you better peace of mind and reduces your stress.
This is because the post-consolidation interest rate is lower than the accumulated interest rates of your previous loans.
2. Easier Repayment of Debt
A debt consolidation loan helps you pay off multiple loans more easily without having to keep track of different repayment dates. This is especially so if you have a lot of credit card debt.
3. Lower Installments
A debt consolidation loan is used to simplify debts. It has a long loan tenure.
In fact, a DCP can have a loan tenure of up to 10 years. This would reduce the installment amount you pay.
4. Credit Booster
Bad credit records will lower your credit score. But when paid on time, a debt consolidation loan boosts credit.
5. Lower Interest Rate
A debt consolidation loan should offer you a lower interest rate. Interest rates for all loans differ in Singapore.
But with consolidated debt loans, you can get lower interest rates on loans to consolidate debt.
How To Get A Debt Consolidation Loan With Fair Credit
To consolidate a loan with fair credit might be tough but is not impossible. In this section, we’ll discuss some of the steps you can take to earn a debt consolidation loan if your credit is not good.
Monitor Your Credit Score Regularly
One of the most important criteria legal money lenders consider when giving out debt consolidation loans is the borrower’s credit score.
While many banks only offer DCPs to borrowers with good credit scores, money lenders may accept low credit scores.
Checking your credit score regularly will allow you to make an informed decision on which money lender debt consolidation loan to apply for.
Shop For A Money Lender That Accepts Your Credit Score
If your credit score is more than 1,000, there’s a decent chance that you’ll find money lenders who will accept your loan application.
Hence, the next step after knowing your credit score is to shop for money lenders. Try to broaden your search so that you’ll have a good pool of options to choose from.
Check online money lenders, credit unions, and your local bank. You can compare their repayment terms, loan amounts, and interest rates to see which one is more favourable.
Improve Your Credit Score
Sometimes, your credit score can be so bad that you can’t find any money lender that will offer you a debt consolidation loan.
If that happens, all you need to do is wait and try to improve your credit score. Start paying your bills on time and don’t make too many loan enquiries within a short period.
If you do the right things, and repay your bills on time for long enough, your credit score should improve and you’ll be able to apply for a debt consolidation loan.
Try Secured Personal Loans
As stated earlier, debt consolidation loans are usually unsecured personal loans. This means you don’t need collateral to apply for them.
But if you’re having a hard time and don’t know how to get a debt consolidation loan with fair credit, you can try applying for a secured loan instead.
Since the loans are backed by collateral, secured loans are easier to get as it minimises the lender’s risk.
The interest rate is sometimes better than that of unsecured loans.
Debt Consolidation Loan Vs DCP
A debt consolidation plan in Singapore is sometimes called a debt consolidation loan although they are not quite the same.
A debt consolidation plan (DCP) is a debt refinancing programme created by the Association of Banks in Singapore (ABS) in 2017.
In Singapore, a debt consolidation plan:
- Is intended for Singaporeans and permanent residents (PRs)
- Can cover unsecured loans with high interest rates and a total quantum of over 12 times your monthly income
- Covers credit cards, credit lines, and personal loans
- Has a maximum tenure of 10 years
Remember: Unlike a standard debt consolidation loan in Singapore, a DCP does not apply to foreigners or people with total loans below 12 times of their monthly earnings.
You also cannot use it for:
- Business credit lines
- Business loans
- Car loans
- Education loans
- Housing loans
- Joint accounts
- Medical loans
- Renovation loans
Debt consolidation loans are available from licensed money lenders and have more lenient requirements.
Any financial institution that offers you a debt consolidation loan or debt consolidation plan will buy out all your unresolved loans.
Instead of making multiple repayments and paying interest to different financial institutions, you’ll only need to make a single repayment to one financial institution.
Pros And Cons
- Improves your credit score.
- It comes with a lower interest rate.
- It can reduce your monthly payments.
- It helps you keep track of multiple loans.
- It gives you ample time to comfortably repay your loans without worrying about meeting up with deadlines.
- Getting loans for consolidating debt doesn’t make the borrower debt-free. It simply means that the debts are transferred from multiple lenders to one single lender.
- Both the eligibility and repayments are based on your credit score.
- You risk losing your property used as collateral if you default on the terms and conditions of payments.
- Not all prospective borrowers qualify for a DCP. Participants are expected to be salary earners with an annual income of between $20,000 and $120,000.
- Once you have signed up for a DCP, you are not allowed to apply for new loans that are less than eight times your monthly salary. This can prove to be a stumbling block if you need more loans.
Where And How To Apply
You can apply for a debt consolidation loan from a licensed money lender.
Some of the places where you can get a debt consolidation plan in Singapore include:
- American Express International, Inc.
- CIMB Bank Berhad
- DBS Bank Ltd
- Diners Club Singapore Pte Ltd
- HL Bank
- Citibank Singapore Limited
- Industrial and Commercial Bank of China Limited
- Standard Chartered Bank (Singapore) Limited
- Bank of China Limited Singapore
- Maybank Singapore Limited
- Oversea-Chinese Banking Corporation Limited
- RHB Bank Berhad
- HSBC Bank (Singapore) Limited
- United Overseas Bank Limited
How To Apply
Wondering how to get a debt consolidation loan with fair credit? Visit the online platform of the lender or financial institution to begin the process. You’ll need to produce:
- Recent credit bureau reports state your credit score
- Photocopy of your NRIC (front and back)
- Recent copies of your income documents (for the last three months)
- Recent unsecured loan statements and credit cards issued by the current loan providers, etc
After applying, you’ll need to wait for your application to get the green light. Once it’s approved, you can start the repayment process.
Find Out How To Get A Debt Consolidation Loan With Fair Credit
There isn’t a single answer to how to get a debt consolidation loan with fair credit. You can approach institutions that accept your credit score, work hard to improve your credit, or apply for secured loans.
You may need some patience to choose the option that works best for you before you decide.
If you’re looking for a licensed money lender in Singapore that offers good debt consolidation loans, Horison Credit is a great choice.