14 financial institutions to launch debt consolidation plan

It aims to help borrowers reduce their debt.

Fourteen financial institutions will be launching a debt consolidation plan (DCP) to help borrowers cope with the upcoming reduction in the industry-wide borrowing limit.

According to the Association of Banks in Singapore (ABS), the DCP is a new repayment scheme that aims to help borrowers to reduce their debts over time.

The borrowing limit will be reduced from the current 24 times monthly income to 18 times and 12 times in June 2017 and June 2019 respectively.

The DCP provides an option for eligible customers to consolidate their existing unsecured credit balances across FIs with just one participating FI, thereby reducing their monthly debt repayment obligations. Debts that can be consolidated include outstanding balances from unsecured credit facilities like credit cards, personal loans, and overdrafts.

Each customer can only have one DCP at any one point in time. Once a customer’s DCP application is accepted by his bank, the DC Bank will take over his outstanding balances, fees and interest charges from his existing accounts with other banks, which will be suspended or closed.

This new repayment scheme follows the Repayment Assistance Scheme (RAS) launched in April 2015, and expired in December of the same year. While the RAS was a one-off plan, the DCP is a longer-term solution offered by the industry.