Credit facilities can be extremely beneficial if you know how to practice financial discipline. But for people who have a harder time keeping track of overdue payments, falling into a debt trap is inevitable. Taking on more loans to repay existing dues is no doubt a poor financial decision, but when you are neck-deep in high-interest debt, it may often seem like the only way out of financial trouble. This is particularly true in the case of unsecured loans, where there is no collateral that a lender can rely on to settle overdue payments.

If you are struggling with multiple debt payments lined up one after the next, you may be perplexed about how to resolve this financial predicament. Fortunately, Singapore’s financial ecosystem has an effective Debt Consolidation Plan (DCP) crafted precisely for this scenario.

What is debt consolidation, though? And how does it work? Those are just the things we intend to explore here.

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What is debt consolidation?

Debt consolidation is essentially the financial practice of combining multiple loans and liabilities by availing a new loan to pay off several other smaller ones. Typically, the ideal way to go about this is to opt for a new, low-interest loan to consolidate several high-interest liabilities, so your overall costs reduce in the long run. The new debt could also include many other favourable terms like a longer tenure and lower monthly EMIs.

What is the Debt Consolidation Plan (DCP)?

The DCP is a debt management solution that was introduced by the Association of Banks in Singapore (ABS) in 2017. This tool came at a point in time when around 4,000 Singaporeans suffered unsecured debt levels that were 12 times their monthly income or higher each month, on average.[1] The DCP was created specifically for Singapore’s Permanent Residents who were juggling multiple unsecured, high-interest debts.

The official Debt Consolidation Plan in Singapore is formed for people whose outstanding debt is at least 12 times their monthly salary.

How does debt consolidation work?

To truly appreciate the benefits of the DCP, it is important to understand how debt consolidation works. And there is no better way to understand finance than to look at a practical example that can clear things up.

Meet Alex. Let’s assume he has a monthly salary of $4,000. And let’s say this is how his hypothetical debt portfolio looks:

Nature of credit facility

Outstanding balance

Interest rate (p.a.)

Minimum payment

Personal loan




Credit card 1




Credit card 2




Credit card 3




Credit card 4







Here are some observations of interest:

  • Alex’s total outstanding balance comes up to $53,000, which is over 13 times his monthly salary of $4,000.

  • To keep up with his debt, he pays a minimum of $1,685 per month, which is nearly half his monthly salary.

Instead of struggling to repay these debts, with interest being charged on interest, Alex can resort to the Debt Consolidation Plan in Singapore to combine all of these high-interest loans and swap them out for a low-interest debt. The bank from which Alex chooses to avail the DCP facility shall buy out all these high-interest credit card debts and the personal loan, and in exchange, it shall extend a low-interest (personal) loan to Alex.

For instance, assume that the new loan comes at an interest rate of 8% p.a. and say it has a tenure of 10 years. In that case, as per the consolidated debt, Alex only needs to pay interest at 8% p.a. for a fixed tenure. This makes it much easier for him to settle his liabilities without snapping under the burden of a debt trap.

Best debt consolidation plans in Singapore

Some things to know about debt consolidation

Before you apply for a debt consolidation loan in Singapore, here are some important things to keep in mind.

  • Debt Consolidation Plans are available only to Singaporeans and Permanent Residents

  • Salaried employees with annual incomes between $30,000 and $120,000 qualify for the plan

  • Unsecured outstanding balances must be at 12 times the monthly income of the applicant

  • The tenure of the DCP varies from one lender to the next, with most of them offering options between 1 and 10 years

Opting for a Debt Consolidation Plan is easy. There are many lenders who offer these options. You can easily compare them on Lendela and pick the offer that helps you consolidate your loans in the most efficient manner. All you need to do is fill out an easy application that is sent to several banks and financial institutions, who will review your application and reach out to you with their offer, if you qualify. You can then select the financing option that best suits your needs. It is that simple!

So, if you are weighed down by a ton of unsecured debt, it may be time to consider a Debt Consolidation Plan, so you can settle your liabilities quickly and without much trouble.