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Term Loan vs Flexi Loan for Property Financing

10th December, 2009

in Home Loan, Property

home loan

Currently, in the market there are two most widely known Property Financing. There are Term Loan and Flexi Loan. But for many of people, they have no idea what are the different between them & which one to choose when buying a property. Actually, in addition to Term Loan and Flexi Loan, there is a hybrid product called Semi-flexi Term Loan. This will make the confusion even worse.

In terms of interest calculation between Term Loan, Flexi Loan or semi-flexi Term Loan, actually no different between them. All of them use the same principal where interest is calculated base on principal balance. Nowdays, most of the Property Financing or Mortgage loan are based on “daily rest” calculations. In simple word interest is calculated daily based on the outstanding balance.

Also, monthly installment for Term Loan, Flexi Loan and Semi-flexi Term Loan are fixed unless there is change in BLR or BFR.

The main different between Term Loan, Flexi Loan and Semi-flexi Term Loan are,

Term Loan

  • Bank allow you to make extra payment to reduce principals but sometimes you have to inform them prior to that. Depending on the Letter Offer, sometimes Term Loan does not allow for extra payment.
  • Bank doesn’t allow you to withdraw the additional amount you paid earlier in case you need to use it in the future.

Flexi Loan

  • Bank will provide you with additional Current Account that link with the Loan Account. Bank allow you to make extra payment to reduce principals by depositing either through Loan Account or Current Account. At the end of the day, both account will be synchronized. You do not need to inform the bank regrading extra payment.
  • Bank allow you to withdraw the additional deposit at any time by withdrawing via ATM or writing a cheque. You do not need to inform the bank.
  • Bank will impose monthly charge of around RM10 but some banks may give a waiver for this.

Semi-flexi Term Loan

  • Bank allow you to make extra payment to reduce principals but sometimes you have to inform them prior to that.
  • Bank allow you to withdraw the additional amount you paid earlier but bank will charge you processing fee for each withdrawal. The fee is between RM10 to RM50 depending on banks. Some banks also place a limit on the number of withdrawal per year.
  • In conclusion, I definitely prefer Flexi Loan. It gives me flexibility to manage my money. Imagine that, if you combine all of your saving, FD & even salary to your flexi account, immediately you will save on the daily interest. And, if you need to use that money, you can withdraw it anytime as you wish. No limit what so ever. At the end of the day, you will save the interest and reduce your principal at a faster pace and finally shorten the loan tenure.

I am currently having a Mortgage loan from CIMB. I choose Flexi Home Financing-i. It is much better than conventional Flexi Loan as there is no monthly charge of RM10.

{ 10 comments… read them below or add one }

Addie November 23, 2011 at 5:14 pm

hi, just out of curiosity, does that mean that there arent any benefits to term loan then? coz from the way u said it, seems that term loan only has the down side?

Reply

SM November 24, 2011 at 9:59 am

@Addie,

Term loan is the base case / classic loan structure introduce by the banks. When they intro new products (be it flexi or any) it must be look “better” than the old one. Its up to user to find the best package that suits him/herself.

If you’re doing biz / working at company which always give surprise bonus, maybe u can choose flexi so that you can dump extra money inside. Else, if your income is stable and stagnant, then maybe term loan is enough.

I have a term loan for my apt currently. If I have extra money, then I rather dump in some investment vehicle available to replace the purpose of flexi loan.

Reply

1-million-dollar-blog November 27, 2011 at 7:46 am

Addie, as mentioned by SM, I also could not find any advantage of term loan.

Reply

sk February 13, 2012 at 3:41 pm

Hi, may i know what is the diff between normal flexi and islamic flexi?

Reply

1-million-dollar-blog February 14, 2012 at 7:51 am

sk, the concept is the same. The main different is the shariah compliance. Also, as I specify in the post, my Islamic Flexi loan does not have RM10 monthly charges. The conventional flexi loan have this charges.

Reply

Wong September 30, 2012 at 1:02 am

Hi,

Can you confirm that ultimately we can save 120 / year from Islamic Flexi Loan?

I am currently having a flexi loan with CIMB, however I feel not flexible at all due to i experiencing of withdrawing money from other branch over the counter must bring chq book and pay RM5 for each transaction done.

Do you think there is a possibility we can convert my normal flexi loan to islamic flexi loan?

Really appreciate if you can feedback on this matter, Thanks in advance.

Reply

1-million-dollar-blog September 30, 2012 at 9:43 am

Wong, yes the is no RM10 monthly fee. However you can’t convert you loan account.

To overcome this you can transfer online to your other CIMB account.

Reply

SY October 3, 2012 at 11:00 am

So does that mean semi-flexi loans have no current account for you? Should there also be any monthly charges if you were to opt for a flexi loan?

Reply

1-million-dollar-blog October 3, 2012 at 3:21 pm

SY, yes I think there is no current account for semi-flexi.

For CIMB flexi account, there is no monthly charge for the Islamic flexi but there is RM10 monthly charge for conventional flexi.

Reply

Wong December 26, 2012 at 1:24 pm

Hi,

I just walk in to CIMB branch to find out Flexi Home Financing-i.
They are imposing RM10 montly and Setup fees of RM200 now for Flexi Home Financing-i. No able to save extra cost on it.

Can you please verify this product has changed by inccured RM10 monthly fees and the Setup fees of RM200?

Furthermore, could you please provide me your banker contact too?
my email address is [email protected]

Reply

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