Are you planning to opt for a debt consolidation loan Singapore? Don’t worry; we are here to help you know every single point about the DCP. The debt consolidation plan is an alternative to various other loans. Let’s study this in brief.
DCP stands for a debt consolidation plan. It is an arrangement made by a bank to make all your possible loans come under a single roof. If you have taken multiple loans from multiple institutions, you can club them together. The loans can either be a personal loan or credit card amount. You can easily club them together under the policy of debt consolidation plan. You cannot club your house loan or car loan under DCP.
There are various plans offered by different institutions. Every plan has its own criteria and eligibility. To opt for DCP, you have to first fit into the requirement boxes of the institution. Not everybody can opt for DCP. There are specific fixed stringent criteria for the plan.
THINGS TO KEEP IN MIND
- Debt consolidation is given to Individuals of unsecured loans. If you are a person with secured loans, you will not be given the debt consolidation plan. Debt consolidation is given to those individuals who are under the pressure of unsecured loans. Unsecured loans are your bank loan and credit card loan. You cannot consolidate property loans and car loans since they are secured loans.
- You cannot continue using your existing credit card after opting debt consolidation plan. The Debt consolidation plan is to cover your current loans. If you add some more amount to it, the debt consolidation rejects the approval. So keep in mind not to continue using your credit card facilities. Some of the financial institutions require you to close the existing account. This is due to their privacy policies.
ADVANTAGES OF DEBT CONSOLIDATION PLAN
The primary purpose of the debt consolidation plan is to bring all your debts under one single roof. The primary purpose of doing this is to reduce the interest rate you pay. Another reason for using this is to maximize or minimize the loan’s tenure as per your requirement. There are various advantages of debt consolidation plans. Let us study them in detail.
CONSOLIDATE YOUR LOANS: The main reason behind opting debt consolidation plan is to consolidate all the loans under a single platform. Consolidation means to bring things together. When an individual combines his loans, it means he has piled them up together as one loan. All the credits will be put under one criterion calling it a single loan. There is no problem if you have taken the loan from different institutions.
The debt consolidation experts quickly sort all your loans from different institutions under a single one. You are not required to run to the previous financial institution again and again. All you got to do is close all your relations with the earlier institutions. You are not allowed to use the previous institutions’ credit facilities once you have opted for a debt consolidation plan.
REDUCED INTEREST RATE: The main reason people opt for a debt consolidation plan is to reduce the amount of interest they pay. Every loan has a different rate of interest charged. All you can do is consolidate all your loans under one roof and pay a single interest rate. The main difference between other loans and debt consolidation plan is the interest rate. For instance, you are paying 25 to 30% on credit card loans. Whereas in a debt consolidation plan, many institutions offer 8 to 10% of loan interest. You can see the massive difference between the interest rate.
The interest rate varies from institution to institution. It also depends on the amount of loan you have altogether. The loan amount plays a vital role in a debt consolidation plan. The more the loan amount, the higher the interest rate. It is always said to play a game with your mind while taking a loan. If you think that consolidation will help you pay a lesser interest rate, then it’s a great idea. In many cases, people do not do any research and jump into the plan blindly. Only those individuals make a profit out of this who does in-depth analysis of debt consolidation plans.
TENURE OF THE LOAN: The mandate of the loan plays a significant role in the debt consolidation plan. Every individual will have a different loan taken for a different tenure of time. This varies from loan to loan. Under a debt consolidation plan, you are not required to check every loan’s tenure. The tenure of the debt consolidation plan lasts for years. It entirely depends on you to choose the tenure of the loan. Generally, the tenure of the debt consolidation plan lasts up to 7 to 10 years.
The interest rate also depends on the tenure of the loan. The longer the tenure, the higher the loan amount. Opting for a debt consolidation plan itself is a great idea. But if you want to make a great deal out of this also, then use your brains. If you are opting for a longer tenure of the loan period, you have to pay a higher amount of interest rate. But if you make a huge amount of monthly installments, the interest rate will reduce. By doing this, you can save a lot of money. So before getting into debt consolidation plan, make a complete research plan and then pitch into it.
AVOID CONFUSION
The main advantage of opting for a debt consolidation plan is to avoid confusion. An individual will be under the burden of n number of loans. Keeping each and every detail of the loan of various loans is difficult. The interest amount of different loans, their EMI and tenure differ from one another. Keeping all the information in mind every month becomes tough. Thus an individual can consolidate his or her unsecured loans by using the plan of debt consolidation. This is a great idea to avoid confusion and get the benefit of the plan.