Are You a Good Candidate for a Debt Consolidation Plan?

Debt computation

In the Lion City, delinquency punishes all parties. As a debtor, your credit suffers the longer your financial obligations remain past due. Your creditors do not like you to default because although they can penalize you with fees, they risk absorbing losses as long as you discontinue repayment.

Fortunately, there is a less destructive way to handle your finances and be back on your feet. If you are a citizen or a permanent resident, you can apply for a debt consolidation loan in Singapore to replace all of your unpaid balances with a single more manageable repayment scheme.

However, not all Singapore citizens and permanent residents can take advantage of this privilege. Here are the criteria to qualify for a debt consolidation plan:

You Make at Least S$20,000 Annually

First of all, you need to have a salary that ranges anywhere between S$20,000 and S$120,000. You must present your most recent income documents to facilitate the verification process. Of course, only the sources of income you can prove can be considered during evaluation.

But then again, earning within the income threshold does not guarantee debt consolidation loan approval. Your credentials are still subject to assessment, so set your expectations accordingly.

You Are Not Asset-rich

Aside from your income, your assets are going to be under scrutiny. Generally, the overall worth of your net personal assets, such as investments and properties, should not be more than S$2 million. You also need to provide sufficient papers to prove that you are not too rich to be eligible for a debt consolidation plan.

Financial institutions might want your business, but they do not like customers with means to repay their debts but choose not to. If you exceed the net personal asset maximum limit, you might be denied because you can liquidate some of your valuable possessions to obtain the funds you need to repay what you owe.

You Must Be in the Quicksand of Debt

To be seriously considered for a debt consolidation loan, your combined balances must be 12 times your monthly income. If you owe less than that, you can consider a rejection a message of congratulations because your profile is not considered heavily indebted.

You might need to manage your finances better to free up some cash to pay down your outstanding balances more quickly. Getting denied by virtue of insufficient indebtedness can be a blessing in disguise since you do not have to pay more money to clear all of your financial obligations.

You Want to Consolidate All Unsecured Debts

consolidated debt

To be clear, a debt consolidation loan is only applicable to certain types of unsecured credit. Typically, you can use this financial product for unpaid credit card debts and personal loans. It can’t be used for need-specific unsecured credit facilities, including medical, education, and home renovation loans.

Furthermore, you can’t choose to take care of less than 100% of your total balances. To make sure your debt consolidation plan achieves its purpose, which is to help you be debt-free in the short and long term, a financial institution does not say yes to half-measures.

The debt consolidation process is strict for a reason. Do not attempt to cheat your application, for you can’t outsmart financial institutions.

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