Paying off debts is never easy. But a low interest rate and smaller payments can ease your burden.
When it comes to general consumer debt like credit cards and personal loans, one of the most popular ways to lower your rate is debt consolidation loans in Singapore.
It has both advantages and disadvantages, but you can make an informed decision when you consider the fees to borrow and how your debt is currently set up.
This is a type of loan as it is made available by a lender to settle all debts currently owed.
What is a Debt Consolidation Loan? It is a type of loan that is provided by a lender to pay off any debts currently outstanding. By availing of this loan, all monthly installments can be combined into a single payment that needs to be settled to a new lender. It makes sense to lower the monthly payments, lowering the interest rate, as this will be retained for a longer period of time.
Debt consolidation is a way to pay off debts, requesting a new loan that pays all your debts and that you focus all your efforts on paying a single debt, instead of several at the same time. However, debt consolidation is not for everyone and we tell you why: Pay off your debt by consolidating or with credit repair.
How to consolidate debts?
To consolidate a debt you have to follow the following steps:
Find the financial institution that is said to be willing to offer a debt consolidation loan, which is usually credit cards.
Of all the offers that money lenders make to you, accept the one that suits you best and suits your payment capacity, usually, you can extend the term and reduce the rate, but remember that reducing the monthly payment will also increase the time that you have to liquidate.
Identify the expenses that you can do without so that you can have the resources to pay your only debt.
Make a budget to analyze your ability to pay and thus not have problems in your personal finances for that one debt.
Types of debt consolidation
Using a balance transfer credit card, that is, transferring debt to another institution that has a lower rate, thus reducing the amount that is paid for interest or other commissions.
Take a personal loan that has the purpose of consolidating all your debts into one and thus you have greater control over your finances, by knowing exactly how much you have to pay and on what dates. This is convenient when having different debts makes your financial life look in chaos.
Requirements to consolidate debts
- Good credit history.
- Proof of address and income.
- Details of the bank account (s) you want to transfer.
Recommendations before consolidating a debt
- Consider that it is possible to consolidate debt from your card or account with the bank you want to contract.
- Make sure to contract loans with a fixed rate, in this way the amount to be paid will not increase.
- Do not forget to compare the interest rate you currently have with your card or loan and opt for the most convenient credit.
- Research about the money lender you plan to choose.
Some institutions condition the obtaining of credit with the purchase of insurance. This is to protect themselves and not cause problems for their relatives in the event of non-payment due to some misfortune.
Benefits of consolidating debt:
- Keep in mind that it is easier to have control of a single debt than three or seven.
- Make sure the interest rate is lower than those of your debts separately.
- Remember that by reducing your monthly payment, you will also increase the debt settlement period.
- You will have the possibility of making a monthly budget to know your ability to pay the debt.
- Negotiate directly with the institution that can offer you the debt.
- Maintaining a good credit history is key to accessing future loans with better conditions.
Remember, this is about being very realistic when weighing your income, expenses and what you owe. Paying debts is not easy no matter what the reason for debt was, it is never too late, approach finance specialists and you will see that your financial situation is not as gray as you thought.
Are Debt Consolidation Loans Good?
Yes, as long as you have control of your expenses and do not fall into debt, because the new loan will be much larger and you must pay it, otherwise you will have a debt snowball that could lead to bankruptcy. Remember that to consolidate debts it is important not to have arrears, if you already have more than 3 months and do not have funds to continue paying, it is better to resort to a credit repairer such as Solve your Debt, which helps you settle your debts without having to ask a loan.
Benefits of Debt Consolidation
When considering the benefits of a debt consolidation loan:
- You have to pay a fixed monthly rate to the lender.
- Lower monthly payment, meaning more monthly cash flows in less time.
- The interest rate for the consolidation is usually lower than the current interest rate.
Main advantages of debt consolidation:
You only have one debt
Suppose you owe four different things: the car loan, money on two credit cards, and the card from a department store, you need to be aware of each of those debts and pay 4 bills each month.
With the consolidation, you will free yourself from pending payments with the help of credit, in which your 4 debts will be united into one, in this way you will need to pay only one receipt each month, which will make it easier to plan and budget for your expenses.
Reduction of the average interest rate on the total amount
With four different debts, the highest interest rate can be up to 18% and the lowest interest rate can be 3.5%. After consolidation, the grouped debt can have a single interest, so your average interest rate is significantly reduced, and with it your overall debt and what you have to pay each month.
Debt consolidation loans can reduce the total amount of money you pay monthly, that is, after the consolidation you pay less money in the single monthly payment than the one you pay now when adding all your monthly payments.
If you request a payroll loan, it will be very difficult for you to fall into default, since the monthly payments will be deducted from your payroll biweekly or monthly, and the money that they deposit you can use for your current expenses without worrying about another debt.
DEBT CONSOLIDATION AND FINANCING: WHERE TO CONTACT ME?
The panorama of lending in Singapore is very broad and the offer of the various legal money lenders can be competitive and different depending on the case to be analyzed, including with regard to debt consolidation.
These are just some of the realities in the credit landscape that offer this type of service, allowing you to obtain a mortgage that combines all the installments contracted from previous loans and, possibly, additional liquidity, processing a new and single installment which, thanks to a lower rate and the dilution of the repayment plan over time, it can guarantee you a peaceful night’s sleep.
In order to find the most appropriate debt consolidation plan for your situation, it would be advisable to evaluate the numerous proposals of the various lenders, as each financial company has its own amortization plan which may not be the one suited to your needs; for example, among the listed above, we have a range that can be financed between $S30 and $S100 thousand.
Many companies also offer the possibility of making an approximate and estimate calculation of the operation online, in order to provide you with a first idea which, although summary, will already clarify some aspects: if you have 3 monthly installments relating to as many loans for a total of $S600, with another 10 years of installments and you need $S15 thousand of liquidity to redo the bathroom, calculator in hand you will immediately go to exclude the financial that at most could finance you for $S30 thousand, avoiding unnecessary waste of time value.