Debt consolidation loans in Singapore seem to be the most reliable option for people who have borrowed from tons of creditors before.
While consolidating your debts can sound relaxing, it is best to be careful and take note when taking out such loans from licensed moneylenders in Singapore. Small and minor mistakes can cost you a big fortune if you are not careful. If you aren’t sure yet, here are some of the common debt consolidation mistakes you must avoid if you’ve decided to move forward with the loan.
Applying for a High-interest Loan
The goal of debt consolidation isn’t confined to simplifying the debt repayment plan, but it helps the borrower lower the total debt cost. There’s no use of a consolidation loan from a licensed moneylender that charges a higher interest rate than the standard loans.
If you have a couple of creditors and maxed-out credit cards, you may find it hard to get the debt consolidation loan from licensed moneylenders at a low-interest rate. If that’s the case, you must pay off your current credit and improve your credit standing first. You can only apply for a debt consolidation loan from licensed moneylenders at a lower interest rate. Otherwise, you could end up paying for more in the long run.
Extending Your Loan Repayment Process for Longer
Most borrowers opt for debt consolidation services as it helps them to save most of their income and spend a few bucks every month for debt repayment. As exciting as this offer sounds, it comes with significant drawbacks. The further you stretch the repayment, the higher the interest you will pay.
If you take a consolidation loan to clear your two-years debt and take six years to repay the new loan, you will pay higher interest than required, no matter how affordable the consolidation is. To avoid such a problem, choose a loan with the shortest repayment timeframe.
Getting Stuck with More Debts
Let’s say you have consolidated your credit cards. The consolidated company cleared all your credit card debts, freeing up the credit you owe. However, you begin charging up the credit cards again. Now, you owe a significant amount of money to the consolidation company and have maxed-out credit cards.
In such scenarios, it becomes almost impossible for the borrower to come out of debt. To avoid this mistake, prepare a financial budget and stick to it. It is also possible for you to abandon the credit cards if needed. The least it can do is save you from overspending your income and continue piling up your debts.
Not Verifying the Consolidation Companies
Are you in an urgent need of money to repay all of your debts without spending a significant portion of your income on credit repayment? Despite this, you should not take out a new loan from a random licensed moneylender with interest rates that are untrustworthy or claims to offer better consolidation services.
Even low credit score individuals can acquire low-interest debt consolidation loans from a renowned company. You must do some research and check the authenticity and records of the company before signing the contract. Furthermore, it is essential to check and verify all the debt repayment terms to avoid future chaos.