Over the last few years, the number of Singaporeans with high-interest credit, too many bills, and struggling to repay debts has been going up. With the effects of COVID-19 being felt far and wide, the next call coming through might be from your creditor. Juggling with these high-interest rates is not an easy task, and most people end up defaulting, but there are a way out – debt consolidation loans.
Debt consolidation means that you roll the current debts into a single loan, which is easier to repay and follow. If you want to take this tested and proven route to redefine your finances, it is a worthy decision. Here are the most important things you need to know about debt consolidation in Singapore.
Debt Consolidation is a form of Unsecured Credit
Unlike the common types of loans, such as mortgages or car loans, which are secured, debt consolidation loans are unsecured.
When you apply for debt consolidation, the lender’s decision to approve or decline depends on a number of things, such as credit score and ability to repay. If your credit score is poor, the interest rate is likely to be higher compared to applying when the score is good.
Because the consolidation loan is unsecured, it implies that the lender will not come for your asset to recover the money in the event that you are unable to repay.
Note that this does not mean defaulting will not cause problems. Failing to pay the loan as agreed is likely to attract serious penalties and damage your credit score.
Debts You can Consolidate Using Debt Consolidation Plans Singapore
Debt consolidation plans in Singapore only covers the unsecured type of credit. However, secured loans and joint account credit are included in the loan. This implies that even after consolidating unsecured loans, you might still have to handle the secured ones separately. Here are some of the loans you can consolidate in Singapore:
- Credit line loans.
- Credit card debts.
- Personal loans.
Debt Consolidation can Help to Improve Your Credit Score
As we have already mentioned, a debt consolidated loan is a form of unsecured credit, implying that lenders rely on your credit score to gauge your personal creditworthiness. At this point, you might be wondering how exactly taking another loan will help to improve your score.
It is true that you are taking another loan, which might slightly push down the credit score at first, but will improve it with a huge margin in the long term. One of the parameters used to calculate a person’s credit score is the ability to repay credit on time. Because the previous debts are cleared, and you are left with only one loan, this is enough to give your credit score a significant boost.
The score will continue improving when you pay the consolidated loan as agreed with the lender. Therefore, it is prudent to plan your finances well so that all monthly payments within the loan term are paid without failure. You can also clear the loan earlier than expected, but this might attract an early repayment fee.
Lendela: The Simple Way to Apply for Debt Consolidation in Singapore
The most challenging part when looking forward to borrowing a debt consolidation loan is identifying the lender with good terms and conditions. Since there are so many lenders out there, from banks to online lenders, working with a loan comparison site, such as Lendela, is the best way to pinpoint the best.
Instead of having to fill dozens of forms, loading piles of documents, and taking hours during the application, Lendela makes the process so simple that you only need a few minutes. See the process below:
- Visit Lendela website to open an account and fill a short application form (this takes a few minutes).
- Lendela will get you offers from lenders with the best terms and conditions.
- Lendela helps you pick the perfect choice and books an appointment for you.
- You sign the debt consolidation plan, which rolls the other debts into one.
As you can see, a debt consolidation plan is a good way to redefine your finances and start a new journey to financial freedom. It wraps the high-interest debts, leaving you with only one easy-to-handle loan. Make sure to use Lendela to ensure you only work with the best lenders in Singapore.