Thursday, April 18, 2019

Flexi Loan and Non-Flexi Loan

Flexi Loan and Non-Flexi Loan
Purchasing a property could possibly be one of your biggest financial decisions that you make in your life. There are many properties available for sale, such as properties for sale in Kelana Jaya. Whether it is for own stay or investment purpose, it is still important to look for available loan in the market. However, it gets confusing when you are looking for the loans available. There are many different baking terms that you do not understand, such as Flexi Loan and Non-Flexi Loan. Fret not, this article will guide you through the difference between Flexi Loan and Non-Flexi Loan.

A. Basic Term Loan
The Basic Term Loan is a loan that comes with fixed repayment schedule. Basic Term Loans were the only property loan available back then. Additional payments for the loan was not made easy for borrower as they would need to inform the bank to request for additional payments to be made. Hence, many borrowers have made additional payments for the loans without requesting beforehand, thinking that it would help in reducing principal amount owed. As a result, the amount paid was just sitting in the bank as prepayment and they are not make any profit as deposit, nor were they actually saving on the interest rate for the loan amount.

In addition, additional money that were paid to the term loan accounts were not easily withdrawn out in case of any emergency events. Hence, extra caution was put in whenever the borrowers made additional payments.

The reasons that the banks place such strict rules were because the banks were unwilling to allow the borrowers to reduce the principal amounts as they like due to extra money earned from the interest payments. In addition, the banking systems were not advance as compared to the banking systems today.

B. Semi-Flexi Loan

The Semi-Flexi Loan is an evolution of the Basic Term Loan. The banks in Malaysia have started lowering the hurdle to make additional payments in further reduce the owed principal amount. Furthermore, there is no need to write in to the bank to request for additional payments. Additional payments now do not go as prepayment, but it directly reduces the loan amount.

Moreover, additional money that were paid to the loan account is now possible for withdrawal. However, it incurs some processing time and processing fee of approximately RM50 to RM100, per withdrawal.

Although you cannot withdraw the money anytime as you like, the additional money is still accessible in case of any emergency events. Do bear in mind that different banks will have different procedures in withdrawing the additional money. Some banks might require the borrowers to still write in, whereas some might make it accessible via the Internet Banking Portal.

As of today, all loans offered by major banks in Malaysia are Semi-Flexi Loan by default.

C. Flexi Loan

Many applicants have missed checking out the Flexi Loan service that is available. A Flexi loan is a loan that allows you to place additional money that is withdrawable in the loan account. It is a flexible loan service that allows you to draw out money as you like without any charges incurred. This is done by tying your current account to your loan. The installment amount will then be deducted from your current account on a scheduled monthly basis. Additional money placed in the current account will then go directly into reducing the owed principal amount.

It is recommended to go with a full Flexi Loan if you have the extra money that you could use to make advance payment and reduce the outstanding balance. In addition, your cash balance in your account is excluded from outstanding balance for the interest calculation. This will then give you more flexibility and you will be saving on your interest payable as you will be paying for lesser interest when you opt for a full Flexi Loan.

However, do bear in mind that there are disadvantages that come with a full Flexi Loan. Most banks have a monthly fee charged for maintenance of your current account, normally ranging between RM5 to RM10, per month. In addition, the interest rate for a Flexi Loan is not as good as the interest rate offered by a Basic Term Loan.

In conclusion, although there are benefits that come with a full flexi home loan, it is perfectly fine to opt for a Non-Flexi Loan if you are tight on your cash or you do not have any intention of putting your money into the loan to reduce interest payable. Furthermore, you might also be able to get better interest rate if you opt for a Non-Flexi Loan. Make sure you make a housing loan comparison from different banks before you decide on which loan service to engage with. If not, engage with a banker to seek for professional advises.

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