Debt is increasing in Singapore, there is no doubt about it, between 2004 – 2014, credit card rollover balances have doubled. More and more people are getting into debt, and more and more people need help getting out of it. With that in mind, there are several options to helping you get out of the vicious cycle of debt allowing you to stop paying high interest rates so that Singaporeans can escape the vicious cycle of debt.
So What Are The Debt Repayment Plan Options In Singapore?
The latest addition to the debt repayment programs is the debt consolidation plan that was launched in January this year that offers to help you with debt repayment. However, there have been other plans such as the Debt Management Program (DMP) that has been offered by Credit Counselling Singapore since 2004 and the Debt Repayment Scheme (DRS) that is run by the Insolvency Office for the Official Assignee.
What Is A Debt Repayment Plan Plan?
Basically, a debt repayment plan allows you to combine all your unsecured loans (Credit cards, personal loans, credit lines, etc) into a single loan that has a lower interest rate and at times a longer tenure. This is then repaid monthly.
How Much Can I Save With A Debt Repayment Plan?
Now lets assume you owe $30,000 in credit card debt which you intend to pay over 5 Years
|New Debt Consolidation Plan
|20 – 26%
|$17,688.99 – $23,892.84
Total Interest Over 5 Years
Total Interest Over 5 Years
|$794.82 – $898.21
You would save about $8,552 – $14,756 over 5 years in interest alone, and anywhere between $140 – $240/ month in monthly payments. Not to mention the additional fees that may be incurred.
4 Important Things You Need To Know About The New Debt Consolidation Plan
- The total amount in your debt consolidation plan will not be the same as the total amount of unsecured debt you have. As part of the Debt Consolidation Plan, an allowance of less than or equal to 5% will be imposed on top of your unsecured debt, this is to cover any incidental charges. This is Mandatory and cannot be excluded
- Debt Consolidation Plans are still subject to credit review and any of the participating financial institutions can reject you or offer you a lower amount than your total unsecured debt
- Once you start a debt consolidation plan, you will lose access to your existing unsecured credit lines. So your credit cards, personal loans and credit facilities will no longer be valid.
- You cannot apply for new unsecured facilities until your balance to income ratio (Outstanding Balance / Monthly Income) reduces to or below 8x your monthly income or 4x with the Financial Institution that you choose to take up your Debt Consolidation Plan.
That Sounds Great, But Am I Eligible For This?
To qualify for the Debt Consolidation Plan you need to be:
- Be a Singaporean/ Hold A Permanent Resident Status In Singapore
- Earning $20,000 – $120,000/ year
- Net Personal Assets of less than $2 Million
(Net Personal Assets = Total Value Of Assets – Total Value of Liabilities)
- Have outstanding balances that is at least 12x your monthly income
How Do I Apply For A Debt Consolidation Plan
You can approach any of the 14 participating financial intuitions below for a debt consolidation plan.
- American Express International, Inc.
- Australia and New Zealand Banking Group Limited
- Bank of China Limited Singapore
- CIMB Bank Berhad
- Citibank Singapore Limited
- DBS Bank Ltd
- Diners Club Singapore Pte Ltd
- HSBC Bank (Singapore) Limited
- Industrial and Commercial Bank of China Limited
- Standard Chartered Bank (Singapore) Limited
- Malayan Banking Berhad
- Oversea-Chinese Banking Corporation Limited
- RHB Bank Berhad
- United Overseas Bank Limited
And What If I Don’t Qualify For The Debt Consolidation Plan?
Although the Debt Consolidation Plan is the latest debt repayment plan to help troubled borrowers, there are other programs as well, such as…
The Debt Management Program (DMP), a debt repayment plan, which is a monthly instalment plan that allows the individual to gradually repay his unsecured consumer debts (eg. credit cards and overdraft), including the principal amount and moderated interest charges, to all his creditors over a reasonable period of time. This is run by Credit Counselling Singapore, and anyone who wishes to be a part of the DMP needs to attend a free seminar and counselling in order for them to ascertain his financial situation
4 Important Things You Need To Know About The Debt Management Program
- To apply for the Debt Management Program, you must attend the info talk as mentioned above
- Interest reduction in the Debt Management Program is purely at the discretion of the lenders (Which is to say that whether your interest rates go down depends on the banks)
- The Debt Management Program only handles debts that are incurred with financial institutions and other relevant parties in Singapore.
- You do not have to be a Singaporean/ PR to use the Debt Management Program
Or alternatively you might have to apply to the Debt Repayment Scheme (DRS), now this is perhaps a less favourable option, but one that is available mostly for people who are so deep in debt that they would be willing to declare bankruptcy – One of the criteria for this scheme. Unlike the two other repayment schemes mentioned above the Debt Repayment Scheme, applying to the Debt Repayment Scheme (DRS) will form a part of your public record.
4 Important Things You Need To Know About The Debt Repayment Scheme
- To apply for the Debt Repayment Scheme, you need to file a bankruptcy application with the court, at which point the court will assign an OA to determine your suitability for the Debt Repayment Scheme. If you are not approved for the Debt Repayment Scheme, you may be declared a bankrupt
- To qualify, the debts owed must amount to less than $100,000 and will be assessed by an Official Assignee of the Insolvency & Public Trustee’s office
- The Debt Repayment Scheme will form a part of your public record.
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