The taboo on loans has since ended, and these days, it’s become a significant factor for an individual or business’s financial aspects. However, it doesn’t change the reality that a borrower would face troubles that may hinder paying their dues on time. So, it’s essential to learn how loan restructuring in Singapore.
Financial struggles usually happen due to unforeseeable events. On the other hand, it can be because of multiple loans overlapping with their interest rates and fees.
In cases like these, particular loan restructuring in Singapore borrowers can learn and apply for. These specific methods focus on restructuring your loan, which then assists you in managing your debts.
In this article, you’ll acquire the necessary information about such loan restructuring methods in Singapore and why you must assess and consider them.
Understanding Loan Restructuring in Singapore
Debt or loan restructuring in Singapore is a highly practised and encouraged refinancing approach. The purpose of these specific approaches is to manage the debt efficiently. As a result, the loan terms shall be modified better, making the entire debt repayments and charges more affordable for the borrowers like you.
Different types of debt restructuring methods are accessible to you in the country. These are not one-size-fits-all. So, assessing your current loan situation is highly advised to know if the restructuring approach fits your needs best.
Which debt problems may apply to a loan restructuring approach? Below are the specific loans you may seek for loan restructuring in Singapore.
Loan Restructuring in Singapore Options
Restructuring a loan isn’t as complicated as it seems. In truth, it simplifies the whole loan process for a debtor. But first, are the existing loans that you’ve incurred eligible to be consolidated?
The typical and most popular unsecured loans in the country are:
1. Personal Loans
These unsecured loans are sought after by many individuals in Singapore because it’s a flexible loan product. A personal loan is beneficial for various purposes, such as travelling, home renovations, medical bills, and other unexpected expenses.
Personal loans are granted to the applicant, especially when they are creditworthy. If you can repay the loan through stable employment and a steady source of income are the eligible candidates for personal loans.
Banks, financial institutions, and licensed moneylenders in Singapore proffer personal loans. It has an estimated interest rate of 4% to 48% annually. The repayment period can range from one to five years, and borrowers could be required to pay processing fees ranging from 1% to 3%.
2. Credit Card Debts
Another outstanding unsecured loan in Singapore is credit cards. Credit cards allow their users to buy goods and services on credit. Users also have to repay the amount over some time.
The interest rates acquired from a credit card debt may range between 15% to 25% per annum. In addition, users may need to shoulder cash advance fees ranging from 3% to 5% of the amount withdrawn.
In terms of its repayment period, credit card loans are typically shorter than personal loans.
3. Education Loans
Students may apply for education loans from banks or financial institutions in Singapore. This particular loan product aims to assist students in financing their studies. Education loans usually cover tuition fees, living expenses, and other education-related expenses.
The estimated interest rate for education loans can range between 3.5% to 5% per annum or a maximum of 4% per month via a licensed moneylender.
4. Medical Loans
Suppose a family patient or patient sees their finances are dwindling due to medical bills and other costs. In that case, medical loans can shoulder the expenses of surgeries, hospitalisation, or medical procedures.
Medical loans’ approximate interest rate charges could start from 3.5% to 8% per annum. The costs may be higher and rely on your credit score and lender of choice.
5. Payday Loans
There are no short-term loans like payday loans. It’s the best loan product to bridge the financial gap between salaries. But due to their riskiness, these have high-interest rates and must only be pursued as the last choice of getting quick cash.
Payday loans must be repaid immediately, with interest rates starting at a 4% maximum.
6. Debt Consolidation Loans
It’s a loan product that focuses on assisting debtors to refinance their existing debts into a single loan. It’s an excellent method in aiding you to simplify your repayments.
For this loan, you must pay interest rates ranging from 3.5% to 9% per annum. Debt consolidation loans can be secured or unsecured.
7. Renovation Loans
These loans suit homeowners who wish to start or complete their home repairs and renovations. The coverage of a renovation loan can cover expenses incurred associated with the home improvement project, like contractor fees, materials, and other costs.
It can be a secured or unsecured loan with an estimated interest rate of 3.88%.
8. Wedding Loans
It’s the ideal loan for financing wedding-related costs such as catering, venue rental, and decorations. The interest rates for wedding loans could range from 3.5% to 8% annually.
9. Travel Loans
Another unsecured loan, like a personal loan, has a design for travel-related expenses is the travel loans like accommodation, airfare, and other costs. You may apply for it from banks, financial institutions, or licensed moneylenders in Singapore.
Interest rates are fixed, estimated at 3.45% and up. The interest rates may rise because travel loans are unsecured.
Types of Loan Restructuring in Singapore Programmes
People indeed take out loans that depend highly on their financial requirements. As a result, you must refrain from pursuing to restructure their debt based on a whim. It has to be done accordingly via eligibility criteria imposed on each specific method for loan restructuring in Singapore.
These are the three types of loan restructuring in Singapore programmes in the country:
1. Debt Consolidation Plan (DCP)
A popularly recognised loan reorganisation method in Singapore is the debt consolidation plan. It’s among the most accessible restructuring plans for borrowers that concentrate on managing their outstanding unsecured debts.
Unsecured debts or unsecured loans are products that don’t need collateral to attain approval. Thus, there’s no need for a borrower to surrender their cars and other vehicles, real estate properties, or other assets to secure the loan.
Acquire DCP as Loan Restructuring in Singapore
So, a borrower decides to use a debt consolidation plan as their loan restructuring in Singapore option. First, they need to know if they’ll qualify for it, and here are the criteria they have to fulfil:
- Singapore Citizens and Permanent Residents may apply for DCP to simplify their debt obligations.
- Foreigners who meet the eligibility criteria for DCP may apply for it but must provide a valid work permit or employment pass and meet the income requirement set by the financial institution.
- Debtors must have unsecured outstanding balances with one or more financial institutions.
- Must have an unsecured loan with any financial business for at most ninety days.
- Annual income ranges from S$30,000 and S$120,000.
- Should not have any unsecured loan with any financial institution subject to legal proceedings.
A borrower can apply for a debt consolidation plan from banks or licensed moneylenders in Singapore. Comparing loans and conditions like interest rates, fees, and charges offered by diverse DCP providers is an excellent approach to deciding which one proffers the best overall loan restructuring plan.
2. Debt Management Programme (DMP)
The debt management plan is another loan restructuring in Singapore that’s an excellent option for people struggling to fulfil their monthly dues.
It’s also a plan that involves a licensed credit counselling agency to assist debtors in negotiating with their creditors about reducing monthly payments and interest rates. The main objective of DMP is to provide a comprehensive plan to provide more manageable and affordable repayment plans for a more extended period.
The debtor makes monthly payments to the moneylender or agency, which then distributes the funds to the creditors.
Debt Management Loan Restructuring in Singapore Eligibility
- Credit card debts
- Personal Loans
- Renovation Loans
- Medical Loans
- Education Loans
Debt Management Programme providers in Singapore may charge a one-time setup fee and monthly service fee or percentage of the monthly payment to the creditors.
Credit Counselling Singapore (CCS) for Debt Management Programme applicants are:
- Debtors must be Singaporean Citizens or Permanent Resident
- Borrowers must have a regular source of income to commit to the monthly payments
- Debtors have at least unsecured debts amounting to $10,000 and up
- Borrowers have unsecured loans owing to two or more creditors in Singapore
- The debtors have been assessed as having sufficient capacities to repay their unsecured loans within a specific and reasonable timeframe.
Singapore’s Debt Advisory Centre (DAC) also facilitates Debt Management Programme. It proffers three specific approaches and assistance to individuals facing debt problems via debt advice, education, and research.
Application Process for Loan Restructuring in Singapore for DMP or credit counselling:
To apply for DMP from DAC, debtors must call AMP 64163960 or 64163961 to schedule an appointment and acquire an assessment.
You may also seek credit counselling or debt restructuring from licensed moneylenders in Singapore, like Accredit Licensed Money Lender. Access an appointment by visiting the official website.
3. Debt Repayment Scheme (DRS)
It’s a loan restructuring scheme in Singapore with a specific design to help individuals deal with unsecured debts by managing financial obligations and proffering affordable repayment plans. The Credit Counselling Singapore (CCS) offers free credit counselling and debt management assistance to people who require debt repayment schemes.
DRS is effective mainly because it permits debtors to consolidate their unsecured loans into a single repayment plan. Furthermore, it’s tailored to their financial status based on income, expenses, and debt obligations.
The general criteria for DRS are:
- Borrowers have to be Singaporean Citizens or Permanent Residents
- A debtor’s loan must not exceed S$100,000, excluding mortgage loans.
- Borrowers must present proof of earning a monthly income not exceeding S$2,800 or S$3,800 if they have dependents
- Debtors should have a net worth of not less than S$2,500, excluding the value of the borrower’s primary residence.
How to apply for DRS in Singapore?
If a debtor is interested in pursuing the debt repayment scheme (DRS), they must first approach Credit Counselling Singapore (CCS) and schedule a counselling session. From there, the CCS officer will assist the borrower in developing a debt repayment plan that’s both accessible and sustainable for the borrower.
Negotiations may occur between the CCS office and the borrower’s creditors for the debt repayment scheme on the borrower’s behalf. When the creditors approve the repayment plan, the borrower shall commit monthly to pay the CSS, which then distributes the funds acquired to the creditors.
Key Features of Loan Restructuring in Singapore
Debt Consolidation Plan grants excellent vital features that help borrowers assess their eligibility and apply for it.
Lower Interest Rates
Since the multiple existing debts are set into one loan, it’ll have a much lower interest rate than individual interest charges from the outstanding debts.
The interest rate incurred from a debt consolidation plan may range between 4% to 8% per annum. Or may vary on the lender you choose.
Longer Repayment Period
DCP offers a much lengthier repayment period for those who acquired the plan. It can last for ten years and is considered a significant factor in assisting borrowers to manage their debts efficiently.
The more extended repayment period also assists in reducing the monthly repayment sum. Thus, borrowers find it more affordable.
Only One Repayment Per Month
DCP effectively consolidates multiple unsecured loans into only one repayment per month. The confusion and stress a borrower goes through managing their debts are diminished, and they can now avoid missing out on payments altogether.
A borrower with a DCP can now budget their finances and debts better as the plan assists debtors to close in and focus on one loan alone, thus simplifying personal finances.
Professional Counselling (for DMP and DRS)
Aside from having multiple loans, a common issue a debtor faces is the denial that they may have monetary-related problems that are deeper than taking out debts from one financial business to another.
By pursuing loan restructuring like a debt management plan, a borrower is provided debt counselling and budgeting advice by professionals in the industry.
Loan Restructuring in Singapore A Borrower’s Necessity
No one wants to deal with multiple loans at once. It’s a chaotic situation that has a lot of uneventful effects on one’s personal life, finances, and plans.
Regardless of belief, seeking solutions is essential rather than staying stagnant in the same debt cycle. Thus, loan restructuring in Singapore is indeed a borrower’s necessity. It grants immense relief and assistance accessible when seeking professionals and options regarding loan restructuring.
Borrowers like you may have to acknowledge the debt problem. Recognising your loan struggles can assist you in finding the best repayment plan that suits your finances and monetary situation best.
Are you currently struggling with debt in SingaporeYou may beare seeking professional assistance on loan restructuring. Let Accredit Money Lender assist you with loan restructuring and other credit solutions. Apply today and take control of your finances with ease!