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How a Debt Consolidation Plan Could Get You Out of Debt Faster

MoneySmart logo MoneySmart 18/5/2022 Clara Lim
HSBC debt consolidation plan © Provided by MoneySmart HSBC debt consolidation plan

This post was written in collaboration with HSBC. While we are financially compensated by them, we nonetheless strive to maintain our editorial integrity and review products with the same objective lens. We are committed to providing the best information in order for you to make personal financial decisions with confidence. You can view our Editorial Guidelines here.

In Singapore, debt is pretty much an unavoidable fact of adulthood. After all, most of us have to take loans to pay for big-ticket things like housing, cars or university education. The types of debt mentioned above are socially acceptable and aren’t thought of as shameful. But when it comes to “bad debt” such as outstanding credit card balances or personal loans, it’s a different story. Most people with “bad debt” would rather not think about it — let alone talk about it. Burying your head in the sand won’t make your problems go away, though. If you’re struggling with a similar financial situation, we’ll walk you through how to clear your debt steadily and as quickly as possible with a debt consolidation plan.  

What is a debt consolidation plan?

Glad you asked! A debt consolidation plan (DCP), is like a loan for all your outstanding loans. You can apply for a DCP if your outstanding loan balance is equal to or more than your annual income. A DCP brings together all your unsecured debts (like credit cards and personal loans) into one consolidated loan with a lower interest rate and a manageable repayment plan. Imagine that you’re juggling the payments on 2 credit cards and a personal loan, each with a different balance and interest rate. Every month, you face the huge challenge of figuring out how to make all these payments with your limited cash.
Outstanding amount Interest rate
Credit card 1 $9,000 25.9%
Credit card 2 $11,000 26.9%
Personal loan $18,000 11%
For illustration purposes only.   When you sign up for an HSBC Debt Consolidation Plan, all existing unsecured credit facilities will be consolidated. Then you pay back HSBC at a much reduced interest rate.
Outstanding amount Interest rate
HSBC Debt Consolidation Plan $38,000 3.4% (EIR: 6.5%)
Because you are now on the HSBC Debt Consolidation Plan, your debts will stop snowballing. Instead, you only need to pay one single bill and the amount is exactly the same each month. You can choose a loan tenure of 1 to 10 years depending on how much you can afford to pay each month. With the above example, monthly repayments range from $431 (with a 10 year loan) to $3,279 (1 year). Choose the shortest tenure you can manage to avoid paying excess interest. Check out this nifty debt consolidation calculator on the HSBC website:

Why is a debt consolidation plan useful?

You can see that a debt consolidation plan offers a lower interest rate and the convenience of just one bill to pay each month. You also benefit from a manageable repayment plan tailored to your finances. It’s not an instant fix, but at least you can see a feasible end date to your repayments! But the main draw of a debt consolidation plan is that it gives you control over your cashflow. If multiple debts are draining your money each month, a DCP is like a big ol’ sink plug that stops your cash from disappearing. With that plug, you can control how much money goes into the “debt hole” and how much to set aside for your other necessary expenses. Do remember that once you have a DCP, all your existing unsecured credit facilities (credit cards and personal loans) will be closed. If you sign up for the HSBC Debt Consolidation Plan, you will get an HSBC Visa Platinum credit card to use for your monthly expenses. Also, not everyone can take up a DCP — to be eligible for it, you need to have a debt for 12X your monthly income. Below are 3 scenarios to illustrate how a debt consolidation plan can be helpful.  

Scenario #1: Managing escalating credit card debt

Maybe you went a little crazy with online shopping and went into denial mode. Hey, you wouldn’t be the first. After ignoring your credit card bill for months, you finally open your statement and realise you now owe $30,000!!! You can put $915 a month of your $2,500 monthly salary towards your debt, but since the credit card interest rate may charge up to 26.9%, you know it’ll barely make a dent. So you decide to sign up for the HSBC Debt Consolidation Plan. HSBC settles your credit card debt and your account gets closed. You then set up a recurring payment of $919.47/month to your HSBC DCP and switch your credit card to the HSBC Visa Platinum card provided. Just like that, with a similar repayment budget, you can pay your debts in a shorter time.
Amount: $30,000 Interest rate Monthly repayments Tenor Total interest paid
Credit Card 26.9% $915 60 months $24,900
HSBC DCP 3.4% (EIR: 6.5%) $919.47 36 months $3,101
For illustration purposes only.  

Scenario #2: Too many debts to keep track of

Let’s say you signed up for way too many credit cards some time ago. And, oops, you’ve completely lost track of your bills, what with all those different billing cycles. Just when you think you’ve paid off the last one and depleted your monthly budget, you get another one in the mail! You might even have missed some payments, which resulted in late payment fees and snowballing interest. Yikes… Before things get really out of hand, start over with a clean slate with the HSBC Debt Consolidation Plan, which consolidates all those multiple bills into one term loan. You now have just one thing to pay each month, and you know that as long as you make those payments steadily, you’re on your way to eliminating debt.
Date due Interest rate Everything can be consolidated into ONE monthly payment on ONE date each month with the HSBC Debt Consolidation Plan from 3.4% (EIR: 6.5%)
Credit Card 1 3rd of each month 26.9%
Credit Card 2 15th of each month 25.9%
Credit Card 3 27th of each month 26.9%
Personal Loan 19th of each month 11%
Other Loan 1 5th of each month 8%
Other Loan 2 9th of each month 0% but penalty if missed
For illustration purposes only.  

Scenario #3: Refinancing an existing debt consolidation plan

Perhaps you’re already on a debt consolidation plan yourself but things could be better. You bit off more than you could chew, and now realise the monthly repayments are more than you can handle. You’re thinking of opting for a longer tenure and lower interest rate to make your cashflow less tight. Plus, you discover that HSBC offers a lower interest rate from 3.4% (EIR 6.5%) than your existing plan. Luckily, it’s possible to refinance an existing debt consolidation plan with HSBC. Not only do you benefit from potentially lower interest rates and a chance to change your payment plan, you also get 5% cashback for refinancing1.
Amount: $30,000 Interest rate Tenure Monthly payments Total interest payable
Bank A DCP 4.5% (EIR 8.41%) 3 years $946 $4,056
HSBC DCP (Refinance) 3.4% (EIR 6.5%) — lower; plus 5% cashback for refi 3 years, but can be adjusted upon refi to better suit your budget $918 $3,048
For illustration purposes only.  

Slay your debt with HSBC Debt Consolidation Plan

To recap, here are the key benefits of getting a debt consolidation plan with HSBC:
  • Consolidate multiple unsecured loans in one place, simplify repayment
  • Slash high interest debt to as low as 3.4% p.a. (EIR 6.5%)
  • Choose a comfortable monthly repayment plan with loan tenure of up to 10 years
  • A HSBC Visa Platinum credit card with no annual fee for convenience
Promotion: Sign up for the HSBC Debt Consolidation Plan through MoneySmart and you can redeem a gift! Choose from Apple AirPods or an Ergotune Classic Chair. If you sign up directly through HSBC, you’ll get S$300 cashback (new DCP customers) or 5% cashback (if you’re refinancing) to sweeten the deal2. [ms-inline-widget category_slug="debt-consolidation-plan" loan_type="debt-consolidation-plan" loan_amount="100000" monthly_income="5000" citizenship="singaporean/pr" locale="en" country_code="sg" channel="debt-consolidation-plan" product_slug="hsbc-debt-consolidation"] To apply, you will need to meet the following eligibility criteria:
  • Singapore Citizen or Permanent Resident (PR)
  • Annual income between $30,000 to $119,999 (salaried worker) or $40,000 to $119,999 (self-employed or commission-based earner)
  • Total unsecured debt exceeds 12 times your monthly income
Debt is nasty, that’s for sure. And it’s normal to feel stressed and ashamed about it. To start tackling it, though, you have to get pragmatic with a solution like the HSBC Debt Consolidation Plan. Find out more at hsbc.com.sg/dc.   Information accurate as of 18 May 2022. Terms and conditions apply. Visit hsbc.com.sg/dc for details.
  1. HSBC Debt Consolidation Loan Promotion terms and conditions apply
  2. HSBC Debt Consolidation Loan Promotion terms and conditions apply
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