Consolidation is when you take out a single loan to pay off numerous loans. Getting debt consolidation from a reputable Singapore firm means single payments at a reduced interest rate and a lesser monthly responsibility. However, it may also delay your pay-off date, increasing the amount of interest you pay throughout the life of the loan.
How does Debt Consolidation affect credit rating?
Each monthly payment for your debt consolidation plan (DCP) to a Singapore firm is projected on your credit report and affects your credit score. The most traditional solutions, such as consolidating your debts through your bank for the first time with a secured loan, will not cause too much damage.
Opening one credit card to facilitate a debt management plan with your Singapore bank is unlikely to harm your credit rating when you follow the guidelines. The trick is to assess the long-term and short-term implications. When you consider the alternative, brief damage to your credit score as you get back on track may be worth it.
5 Benefits of Debt Consolidation
The best way for many to get out of debt is through getting debt consolidation. It is the most common solution in every debt management plan most Singapore financial firms offer. The following are the main benefits that may apply to you.
#1 Quicker Way to Repay Debt
Taking out a debt consolidation loan from a reputable Singapore firm may help you get closer to ultimate debt repayment. Credit cards have no predetermined deadline for paying off a bill, but a consolidation loan has fixed monthly payments. The sooner you pay off your debt, the sooner you can start putting money toward other priorities.
#2 Streamline Finances
You only have one payment when you combine all of your debt. There is no longer a need to worry about various due dates each month. It can simplify planning and reduce the likelihood of missed payments. Debt consolidation through a reputable Singapore firm might diminish two or three instalments into a single settlement since you utilise the loan cash to pay down other obligations.
#3 Reduction in Interest Rates
Debt consolidation loans with sturdy to exceptional credit often have interest rates much lower than the average credit card. Rates vary depending on your credit score, loan size, and term length. However, a debt consolidation loan from a reputable Singapore firm is likely to have a lower interest rate.
#4 Has a Fixed Repayment Period
The payment and interest rate will stay the same for the loan period, especially if you have a set repayment schedule. Utilise a personal loan for your debt consolidation with a Singapore firm. You will know exactly how much is required each month and when your final payment is due. If you merely pay the minimum on a high-interest credit card, it might take years to pay it off.
#5 Improves Your Credit Score
Getting a DCP with a reputable Singapore firm can eventually boost your credit score. It is especially true if you make on-time loan payments. Payment history is the most crucial component in calculating your score. If you keep your previous credit card debt open, you will have a better credit usage ratio and a higher credit history.
4 Drawbacks of Debt Consolidation
Like everything that provides benefits, there are drawbacks to debt consolidation for your loans in Singapore. They are:
#1 Financial Problems won’t Solve Its Own
Debt consolidation cannot guarantee that you will never be in debt again. If you have a history of living beyond your means, you could do it again now that you are free. Make a reasonable budget for yourself and stick to it to avoid this. Various firms can help you make a finance and debt management plan all over Singapore.
#2 Possibility of Paying Upfront Costs
Before taking up a debt consolidation loan, inquire about all costs, including those for late payments and early repayment. The various costs might range from hundreds to thousands of dollars. It depends on the lender you pick. When seeking debt consolidation loans from Singapore firms, do your homework and read the tiny print thoroughly to ensure you understand the charges.
#3 Higher Payment Rate
Your DCP with a Singapore firm may result in a higher interest rate than the loans you are presently paying. It can be due to several factors, including your credit score. Extending the length of your loan may result in a cheaper monthly payment. However, you might have to pay more interest.
#4 Further Setbacks for Missed Payments
Ensure you can afford your debt consolidation loan from the Singapore lending firm. The plan usually requires monthly payments in a set period. Missing your payment can result in late fines and a worse credit score. Lenders often report late payments to credit bureaus after they reach 30 days past due. Enrol in an automated payment scheme to lower your chances of missing a payment.
Beware of Consolidation Scams
Be wary of debt consolidation and credit restoration proposals, particularly those that promise debt forgiveness or settlement. These schemes differ from loan consolidation and are frequently frauds. If you are requested money upfront, this is a significant red flag. If you fail to make a payment, interest, or fees, you will be charged penalties to the principal. Missed payments will appear on your credit record as a negative transaction. Ensure to do thorough research on a debt consolidation firm in Singapore before jumping on an opportunity.
Work with a Top Debt Consolidation Firm
Are you looking for a firm to help you formulate a debt management plan in Singapore? Come to DebtAid.
DebtAid is a debt consulting service that assists individuals with financial distress in reaching their financial objectives. Contact a debt counsellor from their organisation to understand how to become debt-free and improve your credit score. You must supply Debt Aid with all information on who you owe and how much you owe for the best debt solution plan with Singapore firms. Their debt specialists will do a thorough financial analysis to determine the viability of your case in good faith. Visit their website for more information.