Subscription Modal Banner
Weekly newsletter subscription
Get SingSaver’s top tips and deals, plus an exclusive free guide to investing, sent straight to your inbox.

I agree to the terms and conditions and agree to receive relevant marketing content according to the privacy policy.

Success Tick Icon
Congratulations on successfully joining Singsaver Newsletter

Is a Debt Consolidation Plan Right For You?

Lauren Dado

Lauren Dado

Last updated 22 May, 2017

Consolidating your debts makes repayment easier, but it's not the right solution for all Singaporeans. Read on to find out if a debt consolidation plan can help you.

If you’ve ever been neck-deep in credit card debt, you know what it’s like to feel overwhelmed and anxious about your rocky financial situation. Because interest grows faster than you can repay the balance, it’s tough paying off one overdue credit card, let alone several. When these debts reach more than 12 times your monthly income, dealing with it seems impossible without professional help.

Debt consolidation plans (DCP) were announced in early 2017 to provide relief for Singaporeans struggling with multiple unsecured debts. The main advantage of getting a DCP is easy debt management. You pay off all your credit cards and personal loans at once, in exchange for just one monthly payment to your bank at a lower interest rate. You also have the option to make smaller monthly payments by stretching out the loan tenor up to 7-10 years.

But is this the right debt management tool for you? Before you apply for a DCP, make sure you do your homework:

See If You Meet the Requirements

In Singapore, not everyone can get a debt consolidation plan from a bank. In order to qualify, you must meet the following requirements:

Be a Salaried Employee

DCPs are available for salaried employees who earn an annual income of at least S$30,000 but not more than S$120,000. Depending on the bank, new customers may need to meet a higher minimum income requirement. You must also have Net Personal Assets worth less than S$2 million.

Have Unsecured Debts Of at Least 12 Times Your Monthly Income

DCPs are designed for those who are deep in unsecured debt. As such, you need to have at least 12 times your monthly income worth of debt on credit cards, personal loans, and other unsecured credit facilities. Note that certain types of unsecured loans like education loans and business loans are not eligible for a DCP.

Before applying for one, make sure to prepare all your credit card or loan statements. You will also need to get a confirmation letter showing all your unbilled balances.

Be a Singaporean or Permanent Resident

DCPs are currently not available to foreigners.

Compare Monthly Payments

After making sure you’re eligible for a DCP, it’s time to crunch some numbers. Check how much you are currently paying every month, and compare this to how much your monthly payment on the DCP will be.

Will the DCP monthly payment be 50% less than what you’re paying now? In this case, it will help to get the DCP, as this will free up your cash for essential expenses and some savings. However, having a lower monthly payment means that you will be stretching the loan tenor. This means you will pay more interest over the life of the loan.

Check Your Interest Rates

Look at all your unsecured loans and their interest rates, and compare this to the interest rate and loan tenure of the DCP you want to take out.  In general, the longer the DCP tenure is, the smaller the monthly payment is. The catch is that you have a higher interest rate. A shorter term has lower interest, but has higher monthly payments.

It makes sense to get a DCP if it means paying less interest as you get rid of your debt.

Let’s say you have outstanding debts on 4 credit cards, each with a 25% p.a. interest rate. In this case, you would save a lot of money on interest if you get a DCP from Citi, which has an effective interest rate of 10.5% p.a.

If, on the other hand, your outstanding debts are scattered across several personal loans with an effective interest rate of less than 10.5% p.a., you may not need a DCP. As long as you can manage these accounts on your own, you don’t need to spend more on interest with a longer loan tenor.

Debt Consolidation is Not Debt Forgiveness

The most important thing to remember about a DCP is that it is not the same as getting your debt forgiven or reduced. It simply makes your debts easier to manage.

While your monthly repayments might be lower, you still owe the same amount of money. Make sure that you budget around your monthly payments and do everything you can to pay on time. Otherwise, you could end up paying stiff penalties and late fees

While you’re on a DCP, spend some time rethinking your money habits and finding ways to decrease your spending. A DCP is not a magic bullet to your financial woes. Unless you learn to implement a budget and use credit responsibly, you’ll stay stuck in the same financial pit you were in before.

If You’re Serious About Paying Your Debts, a DCP Can Help

A debt consolidation plan is a smart financial tool for those who are serious about overcoming their unsecured debt once and for all. With a DCP, managing multiple debts becomes simpler and less expensive. With the right plan, you can lower your interest payments and pay off your credit cards and loans as efficiently as possible.

Besides helping you manage multiple debts, Citi’s Debt Consolidation Plan has features that will ease the financial burden of repayments in case of unforeseen situations. Citi’s Debt Consolidation Plan comes with complimentary protection insurance coverage of the borrower’s outstanding indebtedness under the debt consolidation plan, up to S$160,000. The benefit under the policy will be paid out in the event of the borrower’s Accidental Death, Total Permanent Disablement or Involuntary Employment Disruption (each as defined in the policy document).

This means that in case the borrower dies in an accident or gets disabled permanently, the insurer pays Citi the outstanding amount owed under the debt consolidation plan at the time, up to a maximum of S$160,000. In the case of Involuntary Employment Disruption, the insurer will pay Citi the minimum payment due and payable by the borrower to Citi. This will be indicated in the Debt Consolidation Plan's statement of account. The insurer will pay up to a maximum of 6 months.

See the promotion’s Terms and Conditions here.

Read This Next:

What is a Debt Consolidation Plan and How Does It Work?
Here's What You Should Do If You Can't Pay Your Credit Card Bill

Lauren Dado

By Lauren Dado
Lauren has been a content strategist and digital marketer since 2007. As's Content Manager, Lauren edits and publishes personal finance stories to help Singaporeans save money. Her work has appeared in publications like Her World, Asia One, and Women's Weekly.

Lauren is the Content Manager at When she’s not helping people save time and money, she’s doing yoga, hunting for bargains, and scoring travel deals.


Use a personal loan to consolidate your outstanding debt at a lower interest rate!

Sign up for our newsletter for financial tips, tricks and exclusive information that can be personalised to your preferences!