Financial institutions to offer debt consolidation plan

SINGAPORE - The Association of Banks in Singapore (ABS) said on Tuesday that 14 financial institutions will offer a debt consolidation plan to borrowers to help them reduce debt over time.

The plan, which comes into affect on Jan 23, will help those affected by the industry-wise borrowing limit, which will drop from 24 times of one's monthly income to 18 times in June 2017, with a further reduction to 12 times in June 2019.

For those eligible, the plan can be used to consolidate their existing unsecured credit balances across various institutions under a single entity. ABS noted this reduces their monthly debt repayment obligations.

Outstanding sums from unsecured credit facilities like credit cards, personal loans and overdrafts, can be consolidated, and customers can only have one debt consolidation plan at any one point in time, ABS said. 

Once a bank accepts an application for this plan, it will take over all the customer's outstanding balances, fees and interest charges from his/her existing accounts with other banks, while those other accounts will be suspended or closed.

The plan has a key feature, which is the concessionary unsecured credit of one month's income.

"This offers borrowers greater transactional convenience to manage their daily financial needs as they gradually pay down their outstanding unsecured debts," ABS said.