This article was first published on 26 May 2017 and updated on 11August 2018.
Looking to get out of a credit card funk? Short of filing for bankruptcy, there is hope in the form of debt consolidation plans.
Such schemes, called DCP for short, was introduced to the market earlier this year for better debt management.
You could pass this off as ‘just another lifeline’ for the destitute, but we say this is one heck of a lifeline.
Think about it; compared to the blacker mark you’re going to see on your credit bureau report if you declare bankruptcy, or worse, borrowing from loan sharks, DCPs are rather heavenly.
The interest rate on these loan package is generally half (or less) of other unsecured credit lines. You pay back lesser, and you only have to worry about financing one account.
As a complement to the DCP, banks are also offering a revolving credit facility. In layman’s terms, it’s simply a credit card like any other, complete with member privileges.
The only difference is a spending ceiling is limited to your monthly income. Even with the limit, it lets you go through the day-to-day running of your life as though no crisis happened in the first place.
How does DCP work in your favour?
To give you a idea of how DCP works, let’s do a hypothetical case of money un-savviness. For someone who enjoys financial access from credit cards and personal loans, it doesn’t take long for the ‘live in the moment’ high life to go awry.
Before you know it, you might have overextended your credit. The rolling over of payments catches up and letters from banks make a leaning tower on the desk.
Taking a sheet of paper and a pen to chart the debts, this is where the rude shock comes in:
Minimum payment / month
Annual interest rate
Credit card from bank A
Credit card from bank B
Personal loanfrom bank C
At the prevailing interest rates of existing credit lines, you might have to pay about $3,250 in interest every year. The longer you drags it out, the more the interest snowballs.
However, by going for a DCP before things spiral out of control, the situation can be salvaged. Let’s say he chooses a bank’s DCPpackage with an effective interest rate at 7.23% per annum, over a period of 7 years.
Under the consolidation scheme, his monthly payment of $1,150 – together with the annual interest repayment — would have been more than halved to $457.
Who qualifies for DCP?
- You have to be a Singapore citizen of permanent resident earning between $20,000 and below $120,000 per annum with net personal asset of less than $2 million
- Outstanding balance on credit cards and unsecured credit facilities exceed 12X your monthly income
- Some types of unsecured credit are not applicable under DCP, including education, renovation and business loans
- You need to provide your NRIC, latest credit bureau report, income slip and credit card statements during application process
If you need some help with DCP
Did we mention that we have this sorted out for you? We’ve consolidated DCPs from the various banks in Singapore.
To make it simple, you can dictate how much you wish to pay and the period. After which, you get a quick glance at each banks’ offering, which includes details such as processing fee, interest rates and even promotions.
See that compare button just below each banks’ DCP details? That’s what we’re here for, to help you compare and find the best DCP to help you out.