What to do if you fail your debt consolidation plan applications
You try consolidated your mountain of debt from your line of credit and credit card bills, and you had good intentions to stick to your debt consolidation plan. But then, all your applications were rejected by banks, and you lost your job, your car broke down, you gave into spending temptation or your payments were just flat out unmanageable. Either way, you're back at square one.If you're in this situation (again), you're far from alone in Singapore. Estimates that at least a third of clients who sought the SG Debt Buster's help were there because of a failed or rejected by banks on debt consolidation plan. Such plans include balance transfer credit cards, a debt repayment plan or even a personal loan.
If your Debt consolidation plan applications have fallen through, the only thing to do is pick yourself up and go at it again with the help and solutions from SG Debt Buster. Try this three-step approach:
Step 1: Figure out why you failed.
Debt consolidation plans in Singapore are often dubbed "Band-Aid solutions" because you're covering the surface of the problem without addressing the root. You address your bills and interest charges, but not your bad spending habits.
Debt ratio vs. income/expenses is what's most often to blame for a failed consolidation plan. In other instances, consumers don't cut up their credit cards after they've consolidated their debt, and go back to spending on them, leaving them with the consolidated payments plus new credit card payments.
Sometimes, it's just Murphy's Law: you lose your job, or your roof needs a major repair, and you don't have an emergency savings fund to fall back on. Suddenly, you're turning to credit to make ends meet without a plan to repay the new debt.
Step 2: Assess and accept the repercussions.
Depending on how many times your debt consolidation plan applications failed, you will face repercussions for missing payments. The most common consequences include spiked interest rates, losing an asset you used to secure the debt, a negative credit score impact or dealing with a co-signer who's now on the hook for your debt.
In other instances, you may have used assets to secure a consolidation loan. For instance, you may have used a lien on your home as collateral, and those possessions could be on the line if your creditor decides to take action for missing payments. It's worth asking for a second chance or gets an appointment with SG Debt Buster for a free credit counselling.
Finally, be prepared for your credit score to take a hit. You'll be on your creditor's radar quickly if you're missing payments on a large consolidated loan. The minute you default on your debt, your credit rating is hurt and every month that goes by, the negative impact continues.
Step 3: Consider your options.
After you've come to terms with the fallout of failing to obtain a debt consolidation plan, you need to act. There are a few routes to take in rejigging your plans:
Contact your creditor or financial institution: If you've consolidated your debt onto a credit card, line of credit or secured loan, you should call your creditor to let them know that you're falling behind.
Seek help from a family member or credit counsellor from SG Debt Buster: If you know someone who is well versed in personal finance and constructing a budget, she could be invaluable to you. Or, a credit counsellor could be the perfect mediator between you and your creditors. Counsellors often help with getting interest rates waived, for example. They'll also give a sober review of your budget to see if you have any wiggle room in your repayments.
Consider Debt Repayment Scheme or bankruptcy: If you feel like you're in over your head.