How to Manage Your Money, Get Debt Free, and Get Financial Freedom, Consumer News & Top Stories
Debt can sneak in like a thief at night. It starts out innocently enough – maybe you can extend your credit card balance for a few months or take out a personal loan to bridge you until payday. The next thing you know is that your mailbox is full of bills.
If you’re juggling multiple credit card statements and / or unsecured loan repayments, signing up for a debt consolidation plan can be a smart way to make paying off your debt a little easier.
What is Debt Consolidation and How Can It Help You Get Control of Your Finances? (Check out the video above or read on to find out more.)
Whether you are struggling with a job loss, hit by a pay cut, or struggling with multiple mortgage and bill payments, you are not alone with cash flow problems this year given the current economic recession.
Turning to credit card debt or personal credit can be a short-term way to manage day-to-day expenses, but the relief can turn sour quickly – especially if you’re not sure you can pay your bills in full each month.
To make matters worse, unsecured debt, which relates to loans that are not backed by collateral, can come with high interest rates, making your debt grow faster than a hungry teen.
A good debt consolidation plan can help alleviate all of these pain points.
First of all, debt consolidation allows you to move all of your unsecured debts into a single repayment plan. You only have to pay one bill per month, which means less wasted time and less stress.
Next, you can take advantage of attractive interest rates with debt consolidation and save money instantly. The interest rate from the financial institution offering the plan replaces the interest rates you previously paid.
Debt consolidation plans can also have a longer repayment term than your current loans. If necessary, you can repay your debt at a more convenient pace without worrying about defaulting on your payments or receiving angry calls from your creditors.
If you have successfully applied for a debt consolidation plan, you will not be able to apply for new unsecured loans or credit cards until your debt has dropped to eight times your monthly salary. But no worry. This is only a temporary situation that will help you avoid building up new credit until your existing debts are under control.
By helping you pay off your loans faster, easier, and more cheaply, debt consolidation can be a useful tool in ultimately achieving financial freedom.
Just as you shouldn’t buy a new computer without knowing its specifications, you should know what factors to consider when evaluating a debt consolidation plan. Here are five questions to ask yourself when choosing a debt consolidation plan.
1) What is the interest rate?
The interest rate is one of the most important factors to consider when choosing a debt consolidation plan. Put simply, a lower interest rate makes the loan cheaper for you. So you should try to choose a plan that offers a more competitive interest rate than what you are currently paying on your loans.
A simple hack is to use HSBC’s loan calculator to calculate your monthly repayments. This information can be helpful in choosing a debt consolidation plan.
Banks often use the terms “flat rate” and “EIR” to describe the interest rates on their debt consolidation plans.
Flat rates are calculated based on your principal amount. For example, if you borrow $ 10,000 at a flat annual rate of 3.5 percent, you will be paying $ 350 worth of interest annually.
The effective interest rate (EIR) is usually higher than the flat rate and measures the actual interest rate you actually pay when you factor in all of the other costs involved, such as processing fees, compound interest costs, and your repayment schedule.
The HSBC Debt Consolidation Plan offers flat rates starting at 3.4 percent per year. There is no processing fee, which means that the EIR can be kept down to 6.5 percent per year *.
2) What are the processing fees?
Some banks charge a one-time processing fee at the start of a debt consolidation plan. This fee is payable as a lump sum or as a percentage of the loan amount.
Processing fees make a plan more expensive for you and increase your EIR. But of course nobody wants to have to pay more money, especially if they are already in debt!
Fortunately, the HSBC Debt Consolidation Plan waives the processing fee, so you don’t have to worry about hidden costs when transferring your debt to the plan.
3) Are you eligible for the plan?
Singapore debt consolidation plans are typically only intended for Singaporean citizens and permanent residents.
You must meet certain income requirements to successfully apply for a plan. In the case of HSBC, you must have an annual income of $ 30,000 to $ 120,000 for employees or $ 40,000 to $ 120,000 for self-employed or commission recipients.
Additionally, your total credit card and unsecured loan balances should be at least 12 times your monthly income.
4) How long is the loan term?
The repayment term is the term of the debt consolidation plan. If you need more time to repay your loan, you can opt for a plan with a longer repayment term.
If you opt for a longer repayment period, you can spread your payments over a longer period. Note, however, that in some cases you may be able to pay more overall than what is under your existing arrangements, even if the interest rate on the new loan is lower than what you are charging your current loan provider.
Conversely, if you can repay your debt in a shorter period of time, you can opt for a shorter repayment term to lower the total interest paid over the course of the plan.
Before switching to a debt consolidation plan, consider paying early repayment fees with your existing loan providers and carefully consider whether this new loan arrangement is appropriate in your circumstances.
The HSBC Debt Consolidation Plan offers up to 10 years repayment terms and gives you the freedom to repay your debt as quickly or as slowly as you want.
5) Are there any promotions at the moment?
Good advertising can sweeten business and save money.
If you currently have a debt consolidation plan with another bank and decide to switch to HSBCs, you will receive 5 percent cashback of your loan amount once your plan is approved. *
To learn more about your financial health, you can also get a free copy of your HSBC-sponsored Schufa report.
The HSBC Debt Consolidation Plan can help you manage your debt. To find out more, leave your contact details at HSBC here and a credit specialist will get back to you within one business day.
* Terms and conditions apply.