Are you struggling with one too many debts? While taking yet another loan is probably not a wise idea, there are some kinds of loans that can help people who are mired in debt.
Refinancing your loans with a personal loan or debt consolidation loan is a good option, as it reduces the interest rates you will have to pay. On top of that, applying for one at an approved debt consolidation company in Singapore will streamline your debts into one, easing the payment process.
However, not everyone in debt is eligible for a debt consolidation loan. If you are thinking of taking one up, here are some things you should look out for:
- Credit score
You credit score may affect the interest rates on your debt consolidation loan. However, debt consolidation loans on a whole are designed to have lower interest rates, and are meant to help people clear off debts. In fact, if you utilise a debt consolidation loan and pay off your loan in a timely manner, it can boost up your credit score.
- Eligibility requirements
In Singapore, only citizens and PRs are allowed to take up debt consolidation loans. If you are a foreigner living in Singapore, you could consider a foreigner loan to refinance your debts instead.
Generally, the requirement for debt consolidation loan is debt amounting to more than 12 months’ worth of salary. Applicants should have an annual income of between $20,000 to $120,000, and personal assets amounting to not more than $2 million. If you find yourself unable to apply for a debt consolidation plan, you can consider a personal loan from a moneylender instead.
- Collateral
At most licensed money lenders, debt consolidation will require a collateral. A collateral is something of value that serves as a guarantee to the lender that the debt will be repaid – otherwise, the asset will be forfeited if the loan is unpaid. Before applying for a debt consolidation loan, find out what type of collateral the financial institution allows, and decide on what you will put as collateral.
- Debts eligible for consolidation
You might have multiple debts, but keep in mind that not all of them can be covered by a debt consolidation loan. Only unsecured loans – that is, loans that are not covered by collateral – can be refinanced with a debt consolidation plan. Loans for specific purposes, like home, car, or education loans, are also not eligible for consolidation.
Debt consolidation loans are a very helpful tool for those facing significant debts. However, it is not a magic pill, as it still requires discipline and wise choices to choose the right plan and pay off the loan. Do your research thoroughly before committing to a debt consolidation loan that’s right for you.