“Shopping” for the Right Financing Package

"Shopping” for the Right Financing Package

When you set your backyard in order and ready to invest, it is time to go for shopping. You will need to do some research before going to the bank to apply for the loan. Here’s what you must do before submitting your financial documents.

Shop for your right loan package

When you walk into a bank, you are spoilt for choices. Different packages has its own pro’s and con’s. Weigh all these before you choose the right package to get the best loan package that suits your needs. It will be good if you list out all your objectives as well as the preferred features of the loan.

Term Loan

This is the most conventional of all the loans. You pay interest and principal throughout the tenure. Normally, banks will give up to loan repayment tenure of 30 to 35 years or up to the age 65 or 70 years of the borrower. If you would like to pay more to finish the loan earlier, you will need to inform the bank or else extra payment will go towards prepayment for the following months.

Overdraft

Borrowers only pay interest portion without having to pay the principal. How much interest you are charged will depend on how much you have utilized the overdraft facility. Most people who take up this package probably run a business of their own.

 

Characteristic of Overdraft
 
Flexi Loan 
 
Flexi Loan is a hybrid between a term loan and overdraft. The borrowers will still need to pay monthly instalment but can do any additional repayment anytime without informing the bank. The additional repayment will go towards reducing the interest charged on the flexi loan facility as the principal owing to the bank has now been reduced.

Islamic Loan

You have a choice as you can either choose the fixed interest rate or the floating rate. The interest on the floating rate is lower than the fixed. Those who are worried of the increase in the interest rate may opt for the fixed rate.

Interest only Loan

There is a package for secondary property where you can choose to pay the interest portion only for the first 3 or 5 years. With the loan package, one will able to cover his loan instalment.

Payment Holiday

It is a loan packaging by the banks as when you come back from holiday, either your loan tenure or your repayment will be increased. There is no such thing as a free lunch!

This article is a summarized excerpt taken from the BLT – Bank, Law and Tax book of Property Investment. To read more, get a copy of BLT Property Investment by Richard Oon, Miichael Yeoh and Chris Tan available at bookstores near you.

 

 

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