How Much Could You Save by Consolidating Your Debts?

Debt consolidation isn’t just banker jargon—it’s a smart, straightforward way to simplify your finances. By rolling your loans and credit card balances into a single payment with one interest rate, you’ll make things easier to manage and potentially save money too.

Singapore’s household debt-to-GDP ratio has fallen from 70% to 56% over the past 5 years—a healthy sign for the economy. But if you’re still juggling multiple bills, that stat doesn’t mean much. Since 2004, over 24,000 Singaporeans have turned to the Debt Management Programme to get back on track.

Consolidation could help by lowering your interest, reducing the number of payment dates to remember, and giving your monthly budget some breathing room. 

How much you could save by consolidating debt

1. What is debt consolidation?
2. DCP options from major banks in Singapore
3. Other ways to consolidate your debt
4. Case study: Real savings with debt consolidation
5. Benefits of debt consolidation
6. How to get started with debt consolidation
7. Simplify your debt today

 

1. What is debt consolidation?

Debt consolidation is about bringing all your unsecured debts together under one roof. Rather than keeping track of multiple credit card bills with different due dates and interest rates, you’ll just be servicing one loan with one bank.

Think of it as decluttering your financial life like Marie Kondo on money matters. The bank pays off your existing credit cards and accounts and leaves a single monthly repayment bill.

The key benefit? Lower interest. While credit cards can charge around 25%, Debt Consolidation Plans (DCPs) typically offer rates closer to 8% or less. That’s more money saved and less going toward interest.

Banks also include a 5% buffer when calculating your loan. It’s not a fee—it covers any interest that builds up during the transition. Any unused amount is refunded.

 

2. DCP options from major banks in Singapore

Looking at the offers across Singapore’s major banks gives you a clearer picture. Here’s a comparison table for Debt Consolidation Plans for you to weigh your options:

Bank	Interest Rate*	Total Amount 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%
Citi	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%

Interest rates on debt consolidation loans can vary widely—from Standard Chartered’s 3.48% to Bank of China’s 6%. But don’t rely on the headline rate alone.

The Effective Interest Rate (EIR) gives you the real cost of the loan. Unlike the advertised rate, EIR accounts for processing fees and compounding, offering a clearer picture of what you’ll actually pay. Standard Chartered’s 3.48% rate translates to a 6.79% EIR after fees. Bank of China’s 6% rate comes to a 7.48% EIR. The gap between the two is far narrower than the advertised rates suggest. 

Some banks also offer zero processing fees, which sounds great—until you look at the EIR. A lower upfront rate doesn’t always mean a better deal in the long run.

To choose wisely, compare both the advertised rate and the EIR across different lenders. That’s how you find the best value, not just the best headline.

 

3. Other ways to consolidate your debt

Personal Loans

These provide a lump sum that you repay over a fixed term. With rates starting from 1.90% per annum, they’re significantly better than credit card interest rates. Perfect for consolidating moderately sized debts ($45,000-$51,000) without the hassle of opening new accounts.

Balance Transfers

Balance transfers allow you to move existing debt from high-interest credit cards to a new card offering promotional rates—often as low as 0% for 6 months. This interest-free period affords the valuable time to reduce your principal debt without accumulating additional interest charges.

Credit Card Instalment Plans

Convert large purchases into fixed monthly payments, often with 0% interest if you’re punctual with payments. These plans work well for specific expenses rather than multiple debts, similar to buying furniture on instalment at Courts.

However, punctuality is crucial with these plans. Missing even a single payment can void the 0% interest promotion entirely, causing the standard credit card interest rate (typically 25-28% p.a.) to apply to your remaining balance. 

Many banks also charge late payment fees—typically around $100 per occurrence—making this option potentially expensive if you’re not diligent about repayment.

Lines of Credit

Lines of Credit provide a standby reservoir of funds that you can tap into whenever needed, with interest charged only on the amount you actually use.

Popular options in Singapore include: 

• HSBC Personal Line of Credit
• Maybank CreditAble
• DBS Cashline
• UOB CashPlus   

While their interest rates hover around 20.5% per annum—making them more expensive than most consolidation loans—they’re still more affordable than typical credit card interest.

This option gives you the flexibility to borrow only what you need when you need it, similar to a credit card’s cashback feature but with more significant interest considerations to keep in mind.

Secured Loans

This type of loan requires collateral like your home or car but offers lower interest rates. Home equity loans can be excellent for debt consolidation if you own a property. They typically offer the lowest interest rates in the market. However, if you fail to make repayments, the bank has the right to repossess your property to recover what you owe.    

Choosing the right option depends on your specific financial situation—similar to picking between hawker centre food or restaurant dining. Both will feed you, but one might be more appropriate for your budget and circumstances.

 

4. Case study: Real savings with debt consolidation

Let’s examine how debt consolidation could work in an actual scenario. Let’s say you’re currently juggling $20,000 in various unsecured debts, each comes with varying interest rates.

Current debt situation

You currently have:

Debt Type	Amount	Interest Rate	Monthly Payment
Credit card A	$8,000	26% p.a.	$400
Credit card B	$5,000	24% p.a.	$250
Personal loan	$7,000	12% p.a.	$350
Total	$20,000		$1,000

At these rates and payment levels, you’d be paying off these debts for years, with a significant portion going toward interest rather than reducing the principal amount.

Consolidation results: Standard Chartered DCP

Using Standard Chartered’s DCP with an interest rate of 3.48% (EIR: 6.79%):

DCP Details	Value
Total debt to consolidate	$20,000
Processing fee	$120 (estimated)
Loan tenure	5 years (60 months)
Interest rate	3.48%
EIR	6.79%
New monthly payment	$800
Monthly savings	$200

Financial impact

Comparison	Without Consolidation	With Standard Chartered DCP	Difference
Monthly payment	$1,000	$800	$200 saved monthly
Annual payment	$12,000	$9,600	$2,400 saved yearly
Total paid over 5 years	$35,000-$40,000*	$48,000	$7,000-$12,000 saved

*Estimated based on minimum payments and varying interest rates

The consolidation option isn’t just about the interest savings. The reduced monthly payment gives you an extra $200 in breathing room each month—that’s $2,400 per year that can go toward building an emergency fund, investing, or paying off your liabilities faster.

Instead of managing multiple payment dates, amounts, and interest rates, you’ll have just one predictable payment each month. The simplicity alone can make a significant difference in managing financial matters.

Remember that your actual savings will vary based on how you’ve been managing existing debts. If you’ve been making payments above the minimum required amount, your interest savings from consolidation might be less significant. Even then, the simplicity of having just one payment to track each month still makes debt consolidation worthwhile.

 

5. Benefits of Debt Consolidation

Consolidating your debts offers several advantages beyond just financial savings. Here’s why more Singaporeans are taking this approach to debt management.

Lower overall interest rates

The most obvious benefit. Credit card interest rates in Singapore typically hover around 26% per annum. Debt consolidation plans offer rates starting from as low as 3.48%, potentially saving you thousands in interest payments. It’s like comparing taxi fares during peak hours versus off-peak. You end up saving a lot more at the end of the journey.

Simplified money management

Managing multiple debts can be stressful and prone to missing out on payments. Debt consolidation allows for a single, predictable monthly payment. No more tracking different payment schedules, juggling between minimum amounts and interest rates. No more logging into multiple banking apps or websites to wire your money. Just one payment, one date, one account.

Credit score improvement

Your credit score affects everything from future loan approvals to interest rates. When you’re juggling multiple payments, late or missed payments can damage your credit rating. Consolidation ensures you can make payment on time consistently, which improves your credit score. This is particularly valuable in Singapore’s credit-conscious environment—especially towards large item purchases.

Psychological relief

The mental burden of debt shouldn’t be underestimated. Constantly worrying about payments creates stress that affects your health, relationships, and work performance. A consolidated debt provides clarity and lets you know exactly when you’d be debt-free. That peace of mind matters, especially in fast-paced Singapore where mental bandwidth is already limited.

Fixed repayment timeline

Unlike credit cards where minimum payments can stretch your debt for decades, a debt consolidation plan comes with a fixed end date. Most plans range from one to seven years.

Knowing exactly when you’ll be debt-free helps with long-term financial planning. It’s like having a clear ETA on your journey to financial freedom, rather than being stuck in an endless cycle of minimum payments.

Remember that debt consolidation isn’t a cure-all—it’s a tool that works best when paired with responsible spending habits. The goal isn’t just to clear your current debt but to avoid getting back into the same situation.

 

6. How to get started with debt consolidation

Once you understand the benefits of debt consolidation, the next step is figuring out if it’s right for you and how you can proceed. Check out our guide to getting started below.

Check your eligibility

Not everyone qualifies for a Debt Consolidation Plan in Singapore. You need to meet the following criteria:

Eligibility Factor	Requirement
Citizenship	Singapore citizen or PR only
Annual Income	Between S$20,000 and S$120,000
Net Personal Assets	Less than S$2 million
Outstanding Debt	At least 12 months’ worth of your salary

If you don’t meet these requirements, you might need to explore other debt management options like credit counselling or personal loans.

Use our Debt Consolidation Calculator

Before approaching any bank, get a clear picture of what your consolidated loan might look like. Our Debt Consolidation Plan Calculator helps you compare different options based on your specific situation.

Simply enter your:

• Loan amount needed
• Preferred loan tenure
• Citizenship status
• Monthly income

Our calculator generates a list of suitable options from different banks, allowing you to compare interest rates, monthly repayments, and total costs side by side. While calculators provide good estimates, the final interest rate will depend on your credit assessment by the bank.

Choose the right lender

When selecting a bank for your DCP, look beyond just the advertised interest rate:

• Compare the Effective Interest Rate (EIR) rather than just the flat rate
• Check for processing fees—some banks charge none, while others charge up to S$600
• Review the loan tenure options—longer terms mean lower monthly payments but higher total interest
• Consider your existing relationship with banks—sometimes loyalty has its perks

Prepare your application

Most banks require similar documentation:

• NRIC
• Proof of income (latest 3 months’ payslips or 12 months’ CPF contribution history)
• Latest credit card and loan statements showing outstanding balances
• SingPass to verify your credit report

Avoid common pitfalls

Be wary of unrealistic promises from unregulated lenders. Stick with reputable banks that are part of the Association of Banks in Singapore’s DCP scheme. 

Note: debt consolidation isn’t a magic solution. It requires commitment to avoid taking on new debt while paying off the consolidated loan.

 

7. Simplify your debt today

Managing multiple debts doesn’t have to be complicated. With the right consolidation plan, you can streamline payments, cut interest costs, and create a clear path to becoming debt-free.

Take your first step today by using our Debt Consolidation Plan Calculator to see exactly how much you could save.

 

Found this guide helpful? Share it with friends who might be juggling multiple debts!

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About the author

Caleb Leong is passionate about travelling the world and getting involved in cross-cultural works. Freelance digital marketing and content writing is a way for him to express himself creatively while earning his keep. He unwinds by diving into a variety of music genres. Living in a digitally disrupted world, he’d like to offer a different perspective on finances to show people the possibilities of what goes beyond a typical “Singaporean life”.

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