Debt repayment options in Singapore: How to settle your loan problems
Dealing with debt can be overwhelming and stressful, but it’s important to address the issue head-on to regain control of your financial situation. In this comprehensive guide, we’ll explore various debt repayment options available in Singapore. Whether you’re facing small debts or struggling with larger financial burdens, understanding the different methods of debt settlement can help you formulate a plan to address your debt issues effectively.
In Singapore, there are various debt settlement options available for debtors looking for a way out. More specifically, you have 6 options:
1. Debt Settlement Appeal
2. Discounted Lump Sum Settlement
5. Debt Repayment Scheme (pre-brankruptcy)
6. Bankruptcy
Debt Settlement Appeal
The first method to consider is debt settlement appeal. This approach involves reaching out to your creditors directly to appeal for an affordable installment repayment plan. By contacting your creditors and explaining your financial situation, you can propose a repayment amount that you can afford to fully repay the debt owed. It’s essential to attach relevant supporting documents, such as income and CPF statements, to strengthen your appeal. However, keep in mind that this option is only viable if you owe debts to one or a few creditors.
Discounted Lump Sum Settlement
If you have the means to raise a sum of money, you may consider the option of discounted lump sum settlement. This method involves approaching your creditors directly and offering a final settlement of your debt through a lump sum payment. Depending on the amount owed and the sum you’ve raised, you can negotiate with your creditors to settle at an amount less than what is owed. It’s important to note that this method is non-guaranteed and subject to your creditors’ approval.
Debt Consolidation Plan (DCP)
Introduced in January 2017, the Debt Consolidation Plan (DCP) is a debt refinancing program that allows you to consolidate your unsecured borrowings across various banks into a single loan with one participating financial institution. By combining all your loans charging higher interest rates into a single loan with a lower interest rate, you can reduce the amount of interest paid and alleviate some of your financial burdens. Additionally, the convenience of making a single payment to one channel simplifies your debt repayment process. To be eligible for DCP, you must be a Singaporean Citizen or Permanent Resident with an annual income between S$20,000 to S$120,000 and have net personal assets of less than S$2 million. The total interest-bearing debt must also exceed 12 times your monthly income. If you meet these criteria, you can apply with one of the 14 participating financial institutions that provide the DCP.
The following are the 14 participating financial institutions:
1. American Express International, Inc.
2. Bank of China Limited Singapore
3. CIMB Bank Berhad
4. Citibank Singapore Limited
5. DBS Bank Ltd
6. Diners Club Singapore Pte Ltd
7. HL Bank
8. HSBC Bank (Singapore) Limited
9. Industrial and Commercial Bank of China Limited
10. Standard Chartered Bank (Singapore) Limited
11. Maybank Singapore Limited
12. Oversea-Chinese Banking Corporation Limited
13. RHB Bank Berhad
14. United Overseas Bank Limited
Debt Management Plan (DMP)
The Debt Management Plan (DMP), offered by Credit Counselling Singapore (CCS), is an alternative for individuals facing serious financial distress. Administered by The Association of Banks in Singapore (ABS), the DMP is a formal consumer debt restructuring agreement facilitated by CCS with major consumer banks and credit card issuers in Singapore. Under the DMP, CCS helps you draft a DMP Proposal and Repayment Schedule, allowing you to repay your creditors via affordable monthly installments at a reduced interest rate over a reasonable timeline. Unlike the DCP, debts are not consolidated under the DMP, meaning you need to make payments to each creditor according to the agreed repayment schedule. To be eligible for the DMP, you must have unsecured debts of S$10,000 or more owed to two or more creditors. The application process involves attending an Onboarding Session with talks on debts and money management and a 1-to-1 financial counseling appointment to determine your suitability for the program.
Debt Repayment Scheme (DRS)
The Debt Repayment Scheme (DRS) is targeted at individuals in dire financial positions who are on the verge of bankruptcy. This scheme allows you to repay your debt within a set timeframe with no additional interest charges. If you’re not eligible for the DCP or DMP, the DRS can be your lifeline to prevent further legal actions by your creditors. To qualify for the DRS, you must meet the following criteria:
- Total liabilities between S$15,000 and S$150,000
- Gainfully employed with regular income
- Not a sole proprietor or a partner in any firm
- No undischarged bankruptcy
- No previous participation in the Debt Repayment Scheme in the last 5 years
- No voluntary arrangement with your creditors in the last 5 years
Under the DRS, a court-appointed officer known as the Official Assignee assists you in determining a suitable repayment timeframe. You’ll enter into an agreement to make monthly repayments for up to 5 years. It’s important to note that you are responsible for paying fees to your Official Assignee and other relevant administrative fees.
You can read up on the differences in the 3 debt repayment schemes here : Debt Management plan vs Debt consolidation plan vs Debt repayment Scheme
Bankruptcy
Bankruptcy should be considered as a last resort. Declaring bankruptcy has significant consequences, including a public record, the surrendering of assets, and limitations on overseas travel. Additionally, your credit score will be severely affected and may take years to rebuild. It’s crucial to explore alternative options, such as the ones mentioned above, before considering bankruptcy. However, if you find yourself in a situation where bankruptcy is the only solution, it’s important to know your rights and seek professional help.
Conclusion
Debt repayment can be challenging, but with the right strategies and resources, you can overcome your financial burdens. By understanding the various debt settlement options available in Singapore, such as debt settlement appeal, discounted lump sum settlement, debt consolidation plans, debt management plans, and the debt repayment scheme, you’ll be able to formulate a plan that suits your specific needs and financial situation. Remember, it’s essential to seek professional advice and explore all available options before making any decisions. Take control of your debt, regain financial stability, and start building a brighter financial future.
At Tembusu Financial Services, we are here to provide personalized and tailored financial solutions for your unique needs. Let us help you overcome your financial challenges and achieve your goals. To explore how we can support your financing needs, please reach out to us.
