Looking to get out of a credit card funk? Short of filing for bankruptcy, there is hope in the form of debt consolidation plans. Such schemes, called DCP for short, was introduced to the market earlier this year for better debt management. Currently, there are 14 financial institutions offering DCPs. You could pass this off as ‘just another lifeline’ for the destitute, but we say this is one heck of a lifeline.
Think about it; compared to the blacker mark you’re going to see on your credit bureau report if you declare bankruptcy, or worse, borrowing from loan sharks, DCPs are rather heavenly. The interest rate on these loan package is generally half (or less) of other unsecured credit lines. You pay back lesser, and you only have to worry about financing one account.
As a complement to the DCP, banks are also offering a revolving credit facility (in layman’s terms, it’s simply a credit card like any other, complete with member privileges, but spending ceiling is limited to your monthly income) to enable the usual day-to-day running of your life like no crisis happened in the first place.
To give you an even better idea of how DCP works, take our resident Bear as a hypothetical case of money un-savviness. The operative word being hypothetical, of course. Mr Bear discovers the joys of credit cards and personal loans, and it doesn’t take long for his ‘live in the moment’ high life to go awry. He overextends his credit. The rolling over of payments catches up to him and letters from banks make a leaning tower on his desk. Taking a sheet of paper and a pen, he charts his debts and gets a rude shock:
At the prevailing interest rates of his existing credit lines, he will also have to pay about $3,250 in interest every year. The longer he drags it out, the more the interest snowballs.
If Mr Bear applies for a DCP before things spiral out of control, he can still save himself. Let’s say he chooses Citibank’s package at 10.5% per annum, over a period of seven years. Under the consolidation scheme, his monthly payment of $1,150 – together with the annual interest repayment — would have been more than halved to $505.82.
For the rest of you who may or may not have the same extent of credit trouble as Mr Bear, that is not the only DCP package you can apply for. Here are the best of them to get you back in the pink of financial health.
DCP applicant’s checklist
1. You have to be a Singapore citizen of permanent resident earning between $20,000 and below $120,000 per annum with net personal asset of less than $2 million
2. Outstanding balance on credit cards and unsecured credit facilities exceed 12X your monthly income
3. Some types of unsecured credit are not applicable under DCP, including education, renovation and business loans
4. You need to provide your NRIC, latest credit bureau report, income slip and credit card statements during application process.
Article first published on GoBear