How Will a Debt Consolidation Loan Affect Your Credit Score?

1. How Will a Debt Consolidation Loan Affect Your Credit Score? Analysts have found that the average debt per Singaporean household is S$55,112 per capita.Most of this debt is home loans, comprising approximately 75.5% of household debt in Singapore. Other main categories include credit card debt (3.5%) and others (17.9%), such as personal loans and payday loans. If you have also high debt and now in search of a suitable solution to get rid of them, then you can consider debt consolidation loan Singapore. Debt consolidation is a great way to get out of debt and save you from financial ruin. What is Debt Consolidation Loan? A debt consolidation loan is the most popular form of debt consolidation among Singaporeans. In simple word, you get a new loan, which has a lower interest rate and better terms, to pay off your other debts. If you’re currently thinking about consolidating your debts, then go to a licensed moneylender in Singapore because banks typically want to lend to people with high credit score. Your credit score is already low as you are in debt situation. So, it is better you search for an authorized moneylender to get your credit score back on track. How Debt Consolidation Affect Your Credit Score? For instance, take a situation wherein you have taken a payday loan in Singapore. You have given a post- dated check to the payday lender. If it does not get clear from the bank and you default on the loan, then your credit score could take a hit. Debt consolidation loan is a great way to pay off your debt such as payday loans, home loans and others in order to improve your credit score.

2. Debt consolidation loan can have positive effect on your credit score because your several accounts will appear to be paid off. A new credit account is credited when you take debt consolidation loan, but lender will consider other accounts as paid in full. Timely repayment of new credit will also raise your credit score. If you handle debt consolidation properly, the long term effect on your credit would be positive. With debt consolidation, you can also lower interest rates and avoid bankruptcy. However, just remember that improvement in your credit report will take time, as you would need history of repayments. Schedule an appointment with your debt consolidation loan provider to discuss your debt management plan and current financial status. With financial education and planning, you can employ skills to manage your payday loan account or other debt with lower interest rate debt consolidation loan in Singapore. Ask your moneylender or consolidator to provide you knowledge on how to better manage your debt level so that your credit score eventually improves.