Singaporeans are used to being self-sufficient and never relying on hand-outs. While that's definitely made us resilient, it also means that we end up feeling like we have no one to turn to when we run into problems.

Falling into financial difficulties can be particularly debilitating. With little in the way of a social safety network, falling into debt can be very scary and stressful.

But there is hope. Before reaching the point where you have to declare bankruptcy, it might still be possible to get your finances in order and dig yourself out of debt with the help of a credit counselling programme.

WHAT ARE CREDIT COUNSELLING PROGRAMMES AND WHAT DO THEY ENTAIL?

Credit counselling programmes are designed to get you on the road to paying off your debt and finally become debt free.

As people looking to enrol are probably not in a position to pay for an expensive programme, local NGO Credit Counselling Singapore offers one-on-one credit counselling at a very low fee. Together with a counsellor, you will work out a plan to manage and pay back your debt.

BEST DEBT CONSOLIDATION PLANS IN SINGAPORE

What if you are in debt amounting to more than 12 times your monthly salary, but you think you can pay it back on your own without having to go through credit counselling? 

In that case, your best bet is to look for a debt consolidation plan. Debt consolidation lets you combine all your high interest debt (eg. credit card debt, personal loans, credit lines) under one single lender that charges lower interest rates. So essentially you are paying back all your debt from your previous debtors, and then transferring that debt to another lender.

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Many banks in Singapore such as POSB/DBS, HSBC, Maybank and CIMB Bank offer debt consolidation plans. But to find the best one, you will have to compare interest rates to figure out which would be most cost effective for you.

But what happens if debt consolidation would not be sufficient to get rid of your debt? That's when you want to consider credit counselling.

GETTING HELP FROM CREDIT COUNSELLING SINGAPORE

Credit Counselling Singapore's programme begins with a compulsory introductory talk during which you will learn the basics of debt management. The talk lasts approximately 1 to 1.5 hours.

At the end of the talk, you will be given a counselling request form. You are meant to go home and fill in the form, together with the supporting documents such as your Credit Bureau Report, your last 15 months' worth of CPF statements and your last 3 months' worth of pay slips.

These documents are required in order to give the organisation a clear idea of your financial situation so they can work out whether they can come up with a feasible a debt management plan for you.

After receiving your application, CCS will then contact you for an appointment date.

On the actual date of your counselling session, which may last two or more hours, you will work one-on-one with a credit counsellor.

Your advisor will talk you through your financial position, including your monthly income, expenses and pending debt, and then, if possible, work with you to draw up a debt management plan for dealing with your debt issues.

It is important to note that Credit Counselling Singapore cannot guarantee that you will qualify for a debt management programme. If your situation is too serious, bankruptcy might be your only option. 

Appointments generally take place during CCS's operating hours on weekdays from 9am to 6pm, although you might be able to request for an appointment after office hours on Monday to Thursday if you have special needs.

Each session costs $30, which is cheap when you consider how lengthy each session can be. According to CCS, most people only need one session, however depending on your situation they might ask you to come back and attend more.

WHAT DOES A DEBT MANAGEMENT PROGRAMME LOOK LIKE? 

A debt management programme is a debt repayment scheme that helps debtors avoid bankruptcy. It also functions as a private agreement between you and your creditors to enable you to repay your loans in a more manageable way. Your creditors will have to approve the debt management plan before it can be carried out.

Under a debt management programme, you will be given the chance to repay all your consumer debt (eg. credit card debt, personal loans, credit lines) over a reasonable period of time. The plan will be drawn up based on your own financial situation and your ability to repay your debt.

Instead of consolidating your debts under one lender (as happens under a debt consolidation plan), you will continue repaying your original creditors.

WHAT HAPPENS TO YOUR CREDIT RATING IF YOU CONSOLIDATE DEBTS OR DO IT THROUGH A DEBT MANAGEMENT PROGRAMME? 

If you have consolidated your loans, your credit score will improve as you pay back more and more of your loan if you manage to do so consistently. If you are looking to take out, say, a home loan, you might not have to wait until your debts are fully repaid if your credit score has sufficiently improved in the interim.

If you are you repaying your debts through a Credit Counselling Singapore's debt management programme, your participation in the programme will be indicated on your credit score until your debts are repaid. So yes, this can make it much harder or even impossible for you to take out new loans until you have repaid all your debts.

So, which programme is best for you? If you honestly and objectively think you are able to repay your debts on your own, opt for a debt consolidation plan. But if you need professional help, the earlier you contact Credit Counselling Singapore, the better.

This article was first published on MoneySmart.