Do you have multiple outstanding loans? It can be tough to pay several monthly installments. 

Besides, keeping track of the due dates can be burdensome, and late payments lead to fines.

However, you don’t have to struggle with all these loans. Instead, you can consolidate them to make the payments manageable. 

But how does debt consolidation loan work?

Keep reading this article to learn what is a debt consolidation loan, how does debt consolidation loan work, and how much you can borrow. 

We will also tell you where you can source for a debt consolidation loan. 

What Is A Debt Consolidation Loan?

It is a type of loan that allows you to combine all your existing personal and credit card debts into one loan at a lower interest rate. 

After consolidating your loans, you then repay them as a single loan in monthly installments – just like how you do so for a personal loan. You can pay this loan for up to 10 years. 

How Does Debt Consolidation Loan Work?   

You can apply for a debt consolidation loan in Singapore if you want to consolidate your debts. It is a loan management tool that helps you to consolidate your outstanding loans. 

Here is an example of how this plan works: 

Let’s say Lorna has a current outstanding loan balance of $40,000 between three credit cards from different lenders and a single personal loan. She is earning $3,000. The loans are as follows: 

Outstanding BalanceInterest RateMinimum Payment Per Month
Credit Card 1$15,00026% per annum$450
Credit Card 2$10,50025% per annum$315
Credit Card 3$8,00025.95% per annum$240
Personal Loan$6,50011.32% per annum$270

From the table above, Lorna is supposed to make a minimum monthly payment of $1,275 per month, which is nearly half her salary. Also, the total payment is more than 12 times her monthly salary. 

Lorna can ease this loan burden with a debt consolidation plan. The bank that will provide her the offer will buy out Lorna’s outstanding loan balances, charges, and fees payable from her four loans. The loan accounts will then be closed and temporarily suspended.

For example, Lorna can get a HSBC loan at a 3.4% per annum (effective interest rate from 6.5% per annum) flat interest rate, which she can pay for up to eight years. 

This loan will reduce her monthly installment payments to about $562, which is much more manageable than her previous amount. 

How To Use A Debt Consolidation Calculator 

When considering if you should consolidate your debt, it is essential to use a debt consolidation loan calculator. 

This tool helps generate various loan packages, their interest rates, and payment plans depending on the figures you provide. As a result, you can compare loans from various lenders.

With this calculator, you can know the amount you can borrow and repay comfortably. 

This is because you can adjust the loan amount and tenure to find a monthly installment payment that you can settle on depending on your financial capability.  

How Much Can You Borrow?

When you approach a lender for a debt consolidation loan in Singapore, it is likely to lend you an equal amount to the outstanding balance you owe. 

This includes any fees or charges incurred according to your statement of accounts. 

When receiving your first debt consolidation plan from your money lender, it may charge you an extra 5% on top of your outstanding loan balance. 

The amount helps you cover any costs you will incur from when your loan plan will be approved to when you will receive the funds. 

Besides, the funds will be deposited directly to the lender you borrowed from – and not into your current or savings account. If any money is left from the 5% allowance, it will be refunded or credited back to you.  

However, there is no guarantee that a lender will grant you the full amount to settle your outstanding debts. 

You will need to dig into your pocket to pay the remaining balance directly in such a situation.

Qualifying Criteria 

Even as you ask “how does debt consolidation loan work?”, it is crucial to know whether you can qualify for a loan. Lenders have eligibility criteria that they use to determine if you qualify for the loan.

They will check on the following:

Your Citizenship

You must be a Singaporean or permanent resident (PR) to get a loan to consolidate your debt. Therefore, you may not qualify for this loan if you are a foreigner living in Singapore. 

Your Outstanding Debt 

How much do you owe your lenders? You need to be heavily in debt to qualify for this loan. You can get a lender if you have outstanding unsecured loans that amount to at least 12 times your monthly salary. 

Your Financial Status 

You should be employed and earn between $20,000 to $120,000 per year. Also, your net personal assets need to be less than $2 million.   

Where To Apply For A Debt Consolidation Loan 

Which financial institutions in Singapore can help you to consolidate your debt with loans? You can try the following: 


If you want a debt consolidation plan in Singapore, there are about 14 banks that can help you. Remember, each lender has terms, conditions, rates, and fees. 

Therefore, you should shop around first and compare them before settling on your preferred lender. 

Some of the participating financial institutions include:

  • Citibank 
  • DBS Bank
  • Maybank Singapore
  • Standard Chartered Bank 
  • UOB

Licensed Money Lenders

Banks in Singapore are stricter when giving out loans compared to licensed money lenders. Therefore, you may not qualify for a debt consolidation plan with a bank. 

In such a situation, you can seek help from licensed money lenders such as Credit 21

But is it safe to borrow from a licensed money lender? Yes, it is. 

Every legal money lender in Singapore operates under the Ministry of Law. Besides, this body provides clear guidelines on how these lenders should operate. 

For example, a licensed money lender must explain all the terms and conditions in a language you can understand before you sign the loan contract.


What if you do not qualify for this unique loan from any financial institution in Singapore? 

Is there another way out? Yes, you can find an alternative to help you repay your multiple loans. 

You can apply for a personal loan as it is easier to get than a debt consolidation plan in Singapore. Once you are granted this loan, pay off your high-interest debts such as your credit card bills. 

From there, stay disciplined by having a plan on how to settle your personal loan. Do not fail to repay the loan on time because you will incur a late payment fee. 

Also, avoid overspending so as not to fall into heavy debt again. 

There Are Ways To Consolidate Your Debt In Singapore 

If you have several outstanding loans from different lenders, you can attest to how hard it is to keep up with the monthly installment payments. But loans for consolidating debt make everything easier. 

But how does debt consolidation loan work? It helps you combine all your existing debts into a single loan with a lower interest rate. This makes repayment more manageable.

To qualify, you have to be a Singaporean or PR, earn at least $20,000 to $120,000 per year, and have debts that are at least 12 times your monthly salary to get this loan. 

However, if you do not qualify for it, you can borrow a personal loan from a bank or a licensed money lender to offset your debts. 

For any loan you want to borrow in Singapore, get in touch with Credit 21. We are one of the best licensed money lenders in the industry, helping borrowers get loans at the cheapest interest rates. 

Contact us now or apply for a loan online from the comfort of your home today.