If you’re repaying multiple debts from numerous loan providers at high interest rates, things can turn sour quickly.

You might miss due dates, run out of funds to pay the debts, and end up with more debts from late payments.

So if managing and repaying multiple debts has become a problem for you, a debt consolidation loan might just be what you need to start your journey to becoming debt-free. But you have one problem: Your credit score isn’t great.

This article covers everything you need to know about how to get a debt consolidation loan with fair credit in Singapore. Read on to learn more.

What Is A Debt Consolidation Loan?

A debt consolidation loan Singapore combines all your debts into a single loan. Think of it this way – instead of repaying different loan providers, at different due dates and interest rates, you combine all your outstanding debt into a single personal loan and only repay that loan each month.

This helps you organise your finances better to pay off your debt quickly at a cheaper interest rate because debt consolidation loans offer lower interest rates than multiple loans at high interest.

However, it’s vital to clarify the difference between a debt consolidation loan, and a debt consolidation plan Singapore. Although both terms are similar, they aren’t completely the same.

Debt Consolidation Loan Vs DCP

A debt consolidation plan (DCP) is similar to a debt consolidation loan as it combines multiple debts into a single loan at a lower interest rate. They are also loans for consolidating debt.

However, a DCP is only offered by banks and financial institutions, and can only be used for some types of unsecured loans.

A DCP can be used for unsecured loans such as:

  • Credit lines
  • Credit card debts
  • Personal loans

But a DCP excludes unsecured loans such as student loans, education loans, car loans, renovation loans, joint account loans, medical loans, and business credits.

In contrast, when you take a loan to consolidate debt from a licensed money lender, there might be no restrictions on the types of unsecured loan you can consolidate.

More on this topic:

5 Uses Of A Debt Consolidation Loan

Debt consolidation loans in Singapore can be used for the following purposes:

      1. Personal Loans

If you have multiple personal loans such as wedding loans, payday loans, or emergency loans, you can use a debt consolidation loan Singapore to make repayment easier.

      2. Student Loans

Student loans can become a nightmare if you’ve yet to get a job. You can take out a loan for consolidating debts of this nature.

      3. Renovation Loan

If you took a loan to renovate your home, and you’re finding it difficult to pay it back alongside your other debts, you should consider a single loan to consolidate all your debts.

      4. Credit Card Loans

Credit cards are one of the top reasons for debt in Singapore. With high interest rates, repaying credit card debts can be overwhelming.

If you have fair credit, consolidating all your credit card debt is an excellent solution.

      5. Joint Account Loans

If you have joint account loans, and the other party is failing to pay up, debt consolidation loans can make it easy to repay joint account loans.

Pros And Cons

While a debts consolidation loan appears to be a viable solution to help you manage your debts better, it’s advisable to weigh the pros and cons before you take out such a loan.

Pros

  • Consolidate multiple debts into a single loan: This makes it easier to repay the loan, as you only have to make a single payment each month.
  • Lower interest rates: By consolidating your debts, you can achieve a lower interest rate when compared to the numerous high interest rates for different loans.
  • Improve your credit score: When you pay your consolidate debt loan consistently, you can improve your credit rating favourably.
  • Reduce stress: Struggling with managing multiple debts can place a strain on your mental health. Loans to consolidate debt can reduce the stress associated with multiple debts.
  • Pay off debts quicker: Loans for consolidating debt in Singapore can help you pay off your loans quicker. With lower interest rates and a fixed tenure for repayment, you can easily streamline your finances to pay off your debt.

Cons

  • It won’t solve all your financial problems: While consolidating your debts can be beneficial, it won’t fix your bad spending or borrowing habits. If you keep on spending excessively or borrowing above your means, you’ll run into more debt.
  • Missing payments means more debt: Before you take out a loan for debt consolidation, ensure you have a stable income to repay your debt. Missing payments will incur a late payment fee and add to your debt.

How To Get A Debt Consolidation Loan With Fair Credit

When it comes to how to get a debt consolidation loan with fair credit in Singapore, you need to meet the basic requirements for eligibility.

To be eligible for debt consolidation plan Singapore, you must:

  • Be a Singaporean or a permanent resident (PR) of Singapore
  • Earn between $20,000 to $120,000 annually
  • Have outstanding debt that is at least 12 times more than your monthly salary
  • Have personal net assets that are less than $2 million

The above qualifying criteria are strictly for the following financial institutions offering DCPs:

  • American Express International, Inc.
  • Bank of China Limited Singapore
  • CIMB Bank Berhad
  • Citibank Singapore Limited
  • DBS Bank Ltd
  • Diners Club Singapore Pte Ltd
  • HL Bank
  • HSBC Bank (Singapore) Limited
  • Industrial and Commercial Bank of China Limited
  • Standard Chartered Bank (Singapore) Limited
  • Maybank Singapore Limited
  • Oversea-Chinese Banking Corporation Limited
  • RHB Bank Berhad
  • United Overseas Bank Limited

Money lenders may just require that you’re a Singaporean or PR, and have debts you wish to consolidate.

There might be no restrictions on annual income and total outstanding debt, and some money lenders might even advance debt consolidation loans to foreigners.

When borrowing with a fair credit score, keep the following in mind.

  1. Repay the loan on time: Not repaying as and when payment is due will worsen your credit rating even more.
  2. Do not default on your monthly payment: Aside from the additional fees you can incur from late payments, defaulting on payment affects your credit score because it stays on your credit report.
  3. Do not make frequent loan inquiries: Once you have your debt consolidation loan granted, avoid making multiple inquiries. This makes you appear to be in financial difficulty and will lower your credit score.
  4. Do not take on more debt: If possible, do not take on more debt. This can impact your finances, make you unable to pay your debts, and lower your credit rating.

Where And How To Apply

You can apply for a debt consolidation loan from licensed money lenders in Singapore like Credit 21. Each money lender may have their qualifying criteria, so find out what those are before you submit your application.

To apply for a debt consolidation loan in Singapore, you’ll need to present:

  • Your NRIC or passport
  • Proof of income (payslips, bank statements)

You may not be required to purchase a credit bureau report before applying for the loan, as this can be done on your behalf by the money lender.

Once you have applied for the loan and your application is successful, your outstanding loan amount (or less) will be disbursed to settle all your debt. You’re now left with just a single loan to repay monthly.

Get A Debt Consolidation Loan To Begin Your Debt-Free Journey Today

If you want to know how to get a debt consolidation loan with fair credit in Singapore, Credit 21 offers quick loans at low interest rates.

Contact us to speak with our debt consolidation loan experts, or apply for a loan right away.