Debt consolidation isn’t just some fancy financial term bankers like to throw around. It’s a practical strategy to help you take control of your money. By combining your loans and credit card balances into one single payment—at a lower interest rate—you could simplify your finances and save a good chunk of cash in the process.
While Singapore’s household debt-to-GDP ratio has dropped from 70% to 56% in the past five years (which is great for the country), that stat doesn’t help much if you’re still drowning in monthly bills. Since 2004, more than 24,000 Singaporeans have sought help through the Debt Management Programme. If you’re in a similar boat, debt consolidation might be the step you need to regain control.
Let’s explore how it works—and how much you could potentially save.
1. What Exactly is Debt Consolidation?
Debt consolidation means combining all your unsecured debts—like credit card balances and personal loans—into one single loan from one bank. You’ll only have to track one payment and one due date. Less stress, more clarity.
Think of it like tidying up your financial life—Marie Kondo-style. The bank clears off your existing debts, and in return, you repay them in fixed monthly instalments.
Why do it? Lower interest. While credit cards can charge you up to 25% p.a., most Debt Consolidation Plans (DCPs) offer interest rates closer to 8%—some even lower.
Also, when calculating your loan, banks often include a 5% buffer to cover any interest that might build up during the transition. Don’t worry—it’s not a fee, and any unused portion gets refunded.
2. Debt Consolidation Plans from Major Banks in Singapore
Here’s how some of Singapore’s top banks stack up when it comes to DCPs:
Bank | Interest Rate | Total Payable | Processing Fee | Monthly Payment | EIR |
Standard Chartered | 3.48% | $33,132 | $199 | $920 | 6.79% |
DBS | 3.58% | $33,222 | $99 | $923 | 6.95% |
POSB | 3.58% | $33,222 | $99 | $923 | 6.95% |
Citibank | 3.99% | $33,591 | $0 | $933 | 7.5% |
HSBC | 4.5% | $34,050 | $0 | $946 | 8% |
UOB | 4.5% | $34,050 | $0 | $946 | 8.41% |
Bank of China | 6% | $35,400 | $600 | $983 | 7.48% |
Pro Tip: Don’t be fooled by the headline interest rate alone. The Effective Interest Rate (EIR) is the number you should pay attention to—it reflects the true cost of the loan, including fees and compounding effects.
Even if one bank offers a lower flat rate, a higher EIR could mean you end up paying more. Always compare both.
3. Other Ways to Consolidate Your Debts
If a DCP doesn’t fit your situation, there are other options you can explore:
Personal Loans
You can use a personal loan to pay off your other debts. With interest rates starting from around 1.90% p.a., this can be a great way to manage moderate debt without juggling multiple payments.
Balance Transfers
Transfer your high-interest credit card debt to another card with 0% promotional interest (for 6 months or more). Use this grace period to aggressively pay down your debt.
Caution: If you miss a payment, the promo rate disappears and you’ll be hit with standard card interest again (usually around 25%).
Credit Card Instalment Plans
Ideal for breaking up larger purchases into 0% monthly payments. Best used for single big-ticket items, not multiple debts. Missing a payment voids the 0% interest deal, and late fees apply.
Lines of Credit
These give you access to a pool of funds you can dip into as needed. Examples include HSBC’s Personal Line of Credit and DBS Cashline. While rates are lower than credit cards (~20.5% p.a.), they’re still higher than DCPs.
Secured Loans
If you own a home or car, secured loans offer lower interest rates because you’re offering up collateral. But beware—default, and you risk losing your asset.
Bottom Line: The best option depends on your debt size, repayment ability, and financial goals. Like choosing between hawker fare or fine dining—each has its place depending on your appetite and budget.
4. Real-Life Case Study: How Much Can You Save?
Here’s an example to put things into perspective:
Current Debt Situation
Debt Type | Amount | Interest Rate | Monthly Payment |
Credit Card A | $8,000 | 26% | $400 |
Credit Card B | $5,000 | 24% | $250 |
Personal Loan | $7,000 | 12% | $350 |
Total | $20,000 | – | $1,000 |
You’re paying about $1,000 a month, and a lot of that goes toward interest.
After Consolidation (Standard Chartered DCP at 3.48%, EIR 6.79%)
Details | Value |
Total debt | $20,000 |
Loan tenure | 5 years |
New monthly payment | $800 |
Processing fee | ~$120 |
Estimated savings | $200/month or $2,400/year |
Over five years, you could save anywhere between $7,000 to $12,000, depending on your repayment history. Plus, it’s easier to manage just one payment every month.
5. Key Benefits of Debt Consolidation
- Lower interest rates: Reduce what you pay overall and free up money monthly.
- Simplified payments: One bill, one due date, one plan.
- Improved financial clarity: No more juggling multiple balances and due dates.
- Faster debt repayment: With more going to the principal, you pay it off quicker.
Peace of mind: Less stress, more control.
Final Thoughts
If managing your debt has become overwhelming, consolidating could be the smart move you’ve been looking for. Not only could you save thousands in the long run, but you’ll also enjoy a clearer, more manageable financial life.
Take the first step—compare plans, calculate your savings, and talk to a financial advisor to find the best option for you. The sooner you consolidate, the sooner you regain control.
Ready to take control of your financial future?
Consider scheduling a financial health check with a Financial Advisor. Whether you’re just starting your financial journey or looking to optimize your existing plan, a Financial Advisor can provide personalized guidance tailored to your unique goals and circumstances.
Learn more about: Major CPF Changes in 2025: What Every Singaporean Needs to Know