Drowning in credit card bills and high-interest loans? You’re not alone. The Straits Times reports that credit card debt in Singapore has surged past $8 billion, with rollover balances reaching a record $8.3 billion in Q4 2024. As interest piles up, managing multiple payments becomes overwhelming, making it harder to break free from debt.
A Debt Consolidation Plan (DCP) simplifies repayment by combining multiple unsecured debts into a single loan with lower interest and fixed monthly payments. This structured approach helps borrowers regain control of their finances while avoiding late fees and credit damage. Offered by major banks in Singapore, DCPs provide a clear path to becoming debt-free.
This guide cuts through the noise to give you everything you need to know—from eligibility and interest rates to step-by-step application tips. If you’re ready to take charge of your finances, keep reading.
What is a Debt Consolidation Plan?
A debt consolidation plan (DCP) is a plan of merging all your unsecured credit services such as your credit cards and Singapore personal loans from all of your creditors into one loan. Instead of you having to keep track of all different kinds of loan to repay, quantifying interest rates and payment owed, DCP makes it simpler and more manageable for your repayment progression through a single loan only.
Unlike a personal loan, which provides a lump sum for various expenses, a DCP is specifically used to pay off existing unsecured debts. It also differs from a balance transfer, which shifts debt to a new credit card with low or 0% interest for a short promotional period.
A DCP, on the other hand, offers a long-term repayment plan—typically between three to ten years—making it a more structured and sustainable solution for those struggling with debt.
It is a convenient debt management tool that allows you to combine multiple credit card debts and personal loans into a single loan. Plus, it changes it into a loan with an interest rate that is within your means. As a debtor, you will repay the loan in an automatic monthly repayment for up to 10 years’ time.
Who Qualifies for a Debt Consolidation Plan in Singapore?
Not everyone qualifies for a Debt Consolidation Plan (DCP) in Singapore. To be eligible, borrowers must meet the Association of Banks in Singapore (ABS) criteria, which ensure that DCPs are targeted at individuals who genuinely need debt relief.
The key requirements include:
- Citizenship/Residency: Applicants must be Singapore Citizens or Permanent Residents.
- Income Range: Annual earnings must fall between S$20,000 and below S$120,000.
- Net Personal Assets: Must be less than S$2 million.
- Debt-to-Income Ratio: The applicant’s unsecured credit facilities (such as credit cards and personal loans) must exceed 12 times their monthly income.
Who Is Not Eligible?
DCPs are not available to individuals with:
- Secured loans, such as home loans, car loans, or renovation loans.
- An income above S$120,000 (as they are considered financially capable of managing debt).
- Business or corporate loans, since DCPs only apply to personal unsecured credit facilities.
You can only have one DCP activated in one time. Following 3 months after that, you will be allowed to refinance your existing DCP with another bank that is listed in DCP services if you get a better interest fee.
It is also important to note that you are not to apply for a new credit card or any loans when you have a DCP activated. Only when your outstanding debt reaches a scale that is less than 8 times of your monthly salary that you may do so. This is to ensure you are fully focused on paying off your debts.
Which Financial Institutions Offer Debt Consolidation Plans?
Several major financial institutions in Singapore offer Debt Consolidation Plans (DCPs) with varying interest rates, loan tenures, and benefits. Comparing these options can help borrowers find the best deal based on their financial needs.
Here are some of the key banks offering DCPs:
| Bank | Interest Rate (p.a.) | Effective Interest Rate (EIR p.a.) | Loan Tenure | Processing Fee | Other Benefits |
| DBS/POSB | 3.58% | 6.56% | Up to 8 years | S$99 | Early termination fee: 5% of outstanding balance |
| HSBC | 4.50% | 8.00% | Up to 10 years | S$0 | 5% cashback on refinancing |
| Standard Chartered | 3.48% | 6.33% | Up to 10 years | S$199 | Cashback up to S$500 |
| Citibank | 3.99% | 7.50% | Up to 7 years | S$0 | Complimentary insurance coverage up to S$160,000 |
| UOB | 4.50% | 8.22% | Up to 8 years | S$0 | Complimentary Visa Platinum Card |
| OCBC | 4.50% | 8.06% | Up to 8 years | S$0 | Complimentary OCBC Platinum Credit Card |
| Bank of China | 6.00% | 7.48% | Up to 10 years | S$600 | Complimentary credit card |
Standard Chartered offers the lowest interest rate (3.48%) and a cashback promotion, making it a budget-friendly option. DBS/POSB follows closely with 3.58%, though it comes with a processing fee. HSBC and OCBC stand out for their longer tenures (up to 10 years), while Citibank adds value with complimentary insurance coverage.
Interest Rates and Loan Tenure
When choosing a Debt Consolidation Plan (DCP), understanding how interest rates and loan tenures affect repayments is crucial. Banks in Singapore calculate Debt Consolidation Plan (DCP) interest using the reducing balance method, meaning borrowers pay interest only on the remaining outstanding principal, reducing total interest costs over time.
Interest Rates: What to Expect
Interest rates for DCPs typically range from 3.48% to 6% per annum, with an Effective Interest Rate (EIR) that reflects the true cost of borrowing. For example, OCBC offers 4.50% per annum, while Standard Chartered provides 3.48% per annum.
Loan Tenure: Choosing the Right Term
Most banks allow tenures between 3 to 10 years. A shorter tenure means higher monthly repayments but lower total interest paid. A longer tenure results in lower monthly repayments but higher overall interest costs.
For example, based on Standard Chartered’s online DCP calculator, consolidating S$30,000 over 7 years at 3.48% per annum results in a monthly repayment of S$444.14. Choosing a shorter tenure would increase payments but reduce interest, while a longer tenure would lower monthly costs but increase total repayment.
What Types of Debt Can and Cannot Be Consolidated?
A Debt Consolidation Plan (DCP) is designed to simplify repayments by combining multiple unsecured credit facilities into a single loan with lower interest and fixed monthly repayments. However, not all types of debt qualify for consolidation.
Debts That Can Be Consolidated
DCPs cover most unsecured loans, including:
- Credit card balances: High-interest revolving debt from multiple credit cards.
- Personal loans: Unsecured loans from banks and financial institutions.
- Credit lines: Overdraft facilities and other unsecured credit lines.
Debts That Cannot Be Consolidated
Certain secured and specialized loans are excluded from DCPs, including:
- Joint accounts: Since multiple parties are responsible for repayment.
- Renovation loans: Secured against the home or renovation contract.
- Education loans: Structured for tuition and often come with lower rates.
- Medical loans: Issued for healthcare expenses and may have special repayment terms.
- Business loans: Designed for corporate use, not personal debt relief.
These exclusions exist because secured loans have collateral (such as property or assets) and specialized loans have unique repayment structures. DCPs are specifically intended for high-interest, unsecured personal debt, ensuring borrowers can repay without accumulating more financial strain.
Benefits of a Debt Consolidation Plan
A Debt Consolidation Plan (DCP) offers several advantages for borrowers struggling with high-interest unsecured loans. By streamlining multiple debts into a single structured repayment plan, DCPs provide financial relief and help borrowers regain control over their finances.
Lower Interest Rates
DCPs typically offer much lower interest rates than credit cards, which can charge 25% or more annually. With rates as low as 3.48% per annum, a DCP significantly reduces the overall cost of borrowing, helping borrowers pay off debt faster.
Fixed Repayment Plan
Unlike credit cards, which allow minimum payments that barely cover interest, a DCP comes with fixed monthly repayments. This structured approach ensures that borrowers make consistent progress toward clearing their debt within a set period (up to 10 years).
One Single Payment
Managing multiple loan payments can be overwhelming and increases the risk of missed deadlines and late fees. It consolidates all outstanding unsecured credit facilities into one debt consolidation loan account with manageable monthly installment, making repayments simpler and reducing financial stress.
Credit Score Improvement
By reducing the risk of late payments and defaults, a DCP helps borrowers rebuild their credit score over time. Timely repayments demonstrate financial responsibility, improving creditworthiness for future loans.
Debt Consolidation Credit Card
Some banks, like OCBC, offer a Debt Consolidation Credit Card with a credit limit equal to one month’s salary. This ensures borrowers have access to emergency funds without accumulating new debt, helping them stay financially stable while repaying their DCP.
How to Apply for a Debt Consolidation Plan (Step-by-Step Guide)
Applying for a Debt Consolidation Plan (DCP) is a straightforward process, but ensuring you meet the eligibility criteria and have the right documents prepared will speed up approval. Follow these steps to successfully apply for a DCP.
Step 1: Check Your Eligibility
Before applying, confirm that you:
- Are a Singapore Citizen or Permanent Resident.
- Earn between S$20,000 and below S$120,000 per annum.
- Have unsecured debt exceeding 12 times your monthly income.
- Check your credit score through Credit Bureau Singapore (CBS), as banks assess it before approving your application.
Step 2: Compare Offers from Different Banks
Not all DCPs are the same. Compare:
- Interest rates (e.g., Standard Chartered at 3.48% per annum, OCBC at 4.50%).
- Loan tenure (3 to 10 years).
- Processing fees and promotions (e.g., cashback offers).
Step 3: Prepare Required Documents
- NRIC (front & back).
- Proof of income (latest payslip or CPF contribution statement).
- Outstanding debt details (latest loan and credit card statements).
Step 4: Submit Your Application
- Apply online, in person, or through a bank representative.
- Approval typically takes 5 to 10 working days.
Step 5: Loan Approval & Fund Disbursement
Once approved, the bank pays off your existing unsecured credit facilities directly, consolidating them into a single loan with structured repayments.
Frequently Asked Questions
1. Can I apply for a DCP if I have multiple loans from different banks?
Yes. A Debt Consolidation Plan (DCP) allows you to combine multiple unsecured credit facilities—such as credit cards, personal loans, and credit lines—from different banks into one consolidated loan with a single monthly repayment.
2. What happens if I miss a repayment?
Missing a payment may result in late fees and a negative impact on your credit score. Consistently missing payments could lead to higher borrowing costs in the future and difficulty securing loans.
3. Can I make early repayments?
Yes, but some banks impose early repayment fees. Before paying off your DCP early, check with your lender to avoid unnecessary charges.
4. Is a DCP better than a balance transfer?
A DCP is ideal for long-term repayment, as it offers lower interest rates and structured repayment over several years. A balance transfer provides short-term relief with 0% interest for a limited period, but the rates can increase significantly if not repaid on time.
Conclusion
A Debt Consolidation Plan (DCP) is a debt refinancing program for managing multiple unsecured credit facilities, offering lower interest rates and structured repayment. By consolidating debt into one fixed monthly repayment, borrowers can reduce financial stress and work toward financial freedom. If you’re struggling with high-interest debt, exploring a DCP could be your first step toward regaining control over your finances.
Key Takeaways:
- A DCP merges multiple unsecured loans into a single loan with lower interest and fixed monthly payments, making debt management easier.
- Only Singapore Citizens or PRs earning between S$20,000 and S$120,000 annually qualify, and secured loans like home and car loans are excluded.
- Interest rates range from 3.48% to 6% per annum, and some banks offer cashback, lower fees, or credit card perks, making it essential to compare options before applying.
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