Nobody wants to be in a situation where they cannot meet their debt repayment obligations, since this can easily lead to a downward spiral, no thanks to late fees and additional interest charged.
In such situations, it might be helpful to know about avenues you can turn to for help, such as to either negotiate directly with the creditors, or seek assistance from independent third parties. We outline 3 different options you have below.
Borrowers who are facing difficulties in paying their debt due to mounting interest can approach their creditors to appeal for assistance by writing to them directly.
They can choose to either appeal to have their repayment restructured into a comfortable amount they can afford, or to negotiate directly with the creditors for a discount on the outstanding debt amount owned by making a lump sum payment.
For the former, borrowers must explain their financial situation to the creditor, and then propose a repayment amount based on what they can afford. It is also important for the borrowers to include relevant supporting documents such as income and CPF statements when they negotiate for a solution.
For the latter however, the approach will be suitable if the borrower is able to raise a lump sum through the sale of assets, such as shares or properties, or taking a low-interest loan from a non-financial institution, such as a co-operative society. The borrower should also be able to raise a substantive lump sum amount that is attractive for the credit to enter into a negotiation.
It is important to note that self-administration works well for those who are able to articulate their own financial situation and comfortable to negotiate directly with the creditors. Also, the sole discretion to accept or reject the proposal lies with the creditors.
#2 Debt Consolidation Plan (DCP)
Debt Consolidation Plan (DCP) is a debt refinancing programme which offers the borrower an option to consolidate all their unsecured debts, including credit card debt, unsecured loan and credit line, across financial institutions with one participating institution.
To be eligible for the DCP, the borrower needs to be a Singapore Citizen or a Permanent Resident, earning between $20,000 and below $120,000 per year, with net personal assets of less than $2 million. In addition, the total interest-bearing unsecured debt on all unsecured facilities across the financial institutions in Singapore must exceed 12 times of the borrower’s monthly income.
DCP excludes any renovation loan, education loan, medical loan, credit facility granted for businesses or business purposes and/or outstanding debts under joint accounts.
Borrowers can approach any participating financial institution of their choice to apply for the DCP. However, it is important to note that the financial institutions have the full discretion to approve or reject the application. Also, the terms and conditions of DCP, including interest rates and repayment period, may vary across different banks.
#3 Debt Management Programme (DMP)
For those who need more help in managing their debt, they can turn to the Debt Management Programme administered by the Credit Counselling Singapore (CCS), a non-profit credit counselling social service agency.
DMP is designed for borrowers who are experiencing financial distress with their unsecured debt and loan, are facing difficulties in managing their basic living expenses and may be on the verge of facing legal action from the creditors.
To be eligible for the DMP, the borrower must have unsecured debts owing to one or more banks, with the total amount of at least $10,000. The account must be at least one year old.
Borrowers who wish to embark on the DMP should first attend an information talk on debt management that is held weekly, or to take the online Debt Management Course and pass the Debt Advice Knowledge Quiz. The objective of attending the talk or course is to allow the borrower to have a clearer understanding of their options.
Once the borrower has decided to seek assistance from CCS, they will be required to submit a request for counselling appointment by completing a prescribed Counselling Request Package, and to attach the package with supporting documents.
Borrowers will have to be first assessed for their suitability before being enrolled into the programme. Upon enrollment, the borrower will be assigned to a counsellor, who will help to negotiate with the bank creditors to work on a lower interest rate and longer repayment period, which is subjected to the approval of the bank creditors.
The counsellor will also work with the borrower on managing expenses and budgeting so as to set aside monthly payments for repayment. It is important to note that the borrower will no longer be able to apply for any unsecured credit facilities with any bank.
Tackling Your Debt Situation Sooner Rather Than Later
As you can see, there are channels available for borrowers to restructure and tackle their debt problems. That is why it is a wise move to seek help than to ignore and avoid the problem, which can fester into something bigger, and even culminating in bankruptcy.