With the COVID-19 pandemic ravaging the economy, Singapore may be headed for its worst recession since independence. In this economic climate, some may find themselves struggling to pay back their debts. This is especially so for those who have taken out loans from multiple lenders, or have maxed out multiple credit cards. If you are in such a situation, it may be apt to get a debt consolidation loan.
Simply put, a debt consolidation loan combines multiple debts under one loan. The lender of your choice either provides you with the cash needed to pay off all the other debts or pays off the debts directly. Either way, you are left with just one loan. While this does not actually change the amount of cash you owe, consolidating debt can have several advantages.
Lower interest rates
At times, the interest rates on loans or credit card debt can be exorbitantly high. In fact, many credit cards in Singapore have an interest rate of over 25% per annum. Failing to make payments for even a single year can push one deeper into debt, prompting them to borrow again. This would be bad enough with just one debt or loan to worry about, but it could become overwhelming with multiple.
This is where a debt consolidation loan can help. These loans typically have a lower interest rate, with some that dip below 10% per annum. This means that you save significantly on monthly payments. Furthermore, some moneylenders are flexible with the duration of repayment plans. As such, you may even save in terms of the overall payment, if you can afford a shorter repayment schedule.
Convenience
It can be stressful to manage accounts for numerous disparate debts. Those with multiple debts not only have to handle tedious paperwork but also have to keep track of the payments to each lender.
With a debt consolidation loan, you only need to deal with one lender. By extension, that means that you will have a much easier time handling your financial accounts and administrative work. Debt consolidation loans also typically run on a fixed monthly installment plan, so you do not need to keep track of different repayment dates.
If you are dealing with a licensed moneylender, taking out the loan can be convenient as well. Licensed moneylenders are capable of offering easy cash loans. As such, they often have faster and more streamlined loan approval processes.
Peace of mind
Borrowers who have several loans to pay off may be stressed out for several reasons. A debt consolidation loan could work to alleviate some of these issues. We have already discussed how it can reduce the overall interest rate, as well as make administrative work go smoother.
A debt consolidation loan can also save borrowers from rigid and unaffordable repayment schedules. In some cases, borrowers may be unable to meet their scheduled payments due to a shortfall of income, or other unforeseen circumstances. However, some lenders are not willing to adjust their repayment schedule, causing borrowers to constantly worry about dealing with overdue payments.
In such cases, a debt consolidation loan may be of use. You would be allowed to renegotiate the repayment schedule with the new lender, such that the monthly payments fit reasonably within your budget. As such, you can focus on your work with a peace of mind, knowing that you can comfortably make your payments.
Conclusion
To get the most out of your debt consolidation loan, you should engage a reliable licensed moneylender. The list of moneylenders licensed by the Registry of Moneylenders would be a good place to start.
For those facing financial troubles due to the COVID-19 pandemic, a debt consolidation loan can be a first step on the path to becoming debt-free. With strict adherence to the new manageable payment schedule, you can take back control of your finances and watch your debt slowly but surely whittle away.
