Penny Sense » Loans

Lower interest rates to come

Penny — Wed, 25 Feb 2009 01:58:36 +0000

With the latest cut in Bank Negara’s overnight policy rate to 2% (read the news here) following the recent 75 basis point reduction, this certainly signals more challenging times to come in the local economy. The world’s nightmare of the global financial crisis is far from over and I personally think Malaysia is now beginning to see the potential effect. Whilst the earlier denial of a recession in the country was not quite the right thing to do, at least Bank Negara is making sense in quickly adjusting interest rates to help give buffer to the economy.

What will lower interest rates mean for people on the street like you and me? It means cheaper loans from financial institutions. That’s great news. On the other side of the coin, it also means a lower savings rate for your deposits. Most people have withdrew from investing in the stock market temporarily, and many may have decided to put their money where they thought were safer investing haven – fixed deposits. Now with the OPR being slashed, the banks will subsequently be bringing down the interests offered on deposits too.

I guess we can’t win all the games at hand. I actually don’t mind earning lower interests from deposits and in return have access to cheaper loans and being able to pay off the loan in shorter periods due to the lower interest costs on the loans. It is in fact an advantage that should be taken off to work out how soon a loan like mortgage or personal loan can be paid off so that you can be debt free. Are you planning to do so?

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Lower interest rates to come

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How to save on paying interests on your home loan and shorten tenure

Penny — Wed, 14 Jan 2009 02:18:20 +0000

If you have a home loan with a bank or any financial institution, chances are you are paying your home loan on a monthly installment, and most likely for a tenure of 20 years or more. There are many ways to save on the interest charged on a home loan as well as to shorten the tenure of the loan without breaking your bank. My option is a simple one and you may already know this too.

Instead of paying your mortgage repayments on a monthly basis, you can opt to pay them on a bi-weekly basis. Just divide the monthly installment amount by two and pay your loan twice a month before your payment due date. Some banks will also let you pay on a weekly basis if you would prefer the option.

By paying bi-weekly or weekly, you effectively are paying a little more than your monthly repayments. As an illustration, let’s do a weekly repayment versus a monthly one. Let’s say that you need to pay RM1,000 a month on your home loan. In 12 months, you would have paid RM12,000. If you opt to pay weekly, you will pay RM250 a week for 52 weeks, and at the end of 12 months, you would have paid RM13,000.

Since most home loans’ interests are based on daily rest, by paying more via the weekly or bi-weekly repayments, you actually pay less on interests since you are offsetting more of your principle amount. Not only do you save a couple thousands on interest over the years, you will also be able to reduce your home loan tenure by a few years.

Of course some people don’t like the hassle of paying bi-weekly or weekly, especially so if they do not use online banking. So they opt to pay more on their monthly installment instead. This works too. But for those who don’t wish to fork out more every month, doing this bi-weekly or weekly repayment may work well for you.

If you are keen on doing this, check with your financial institution if they allow such repayment periods because some banks may not accept it. As far as I know, most of the foreign banks in the country allow this repayment method. You may want to check on the local banks if you bank with them.

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How to save on paying interests on your home loan and shorten tenure

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EPF housing installment scheme not as attractive as it seems? (4)

Repay your debt smartly – choose the cheapest one available

Penny — Fri, 04 Apr 2008 16:45:00 +0000

Am I making sense? Maybe the title seems a bit fuzzy, but that’s exactly what one should do in managing debts. One of the debts that most people are stuck with are credit card debts. It’s easy to swipe and sign and forget how much you’ve spent. In case you have over-swiped and are carrying balances in your credit cards, you should check the rate of interest at which you’re charged for owing the bank money.

The standard rate out there is 18% per annum which works out to 1.5% per month. This is not a small charge to be paying on a monthly basis if you’re carrying huge balances. What you can do to reduce your debt is to do a balance transfer to another credit card that offers lower interest rates.

A few banks have been calling to offer their balance transfer programs. Here I’ll share a few so that you are better informed as to which bank offers the lowest rates. The trick is to try to pay up your debt in the shortest duration possible, so most of the rates I’m quoting are for a repayment period of 6 months.

Hong Leong Bank’s generic balance transfer program for a Hong Leong Gold card is 6.99% per annum for an unlimited durating of repayment. It works out to about 0.5825% per month. But wait, it gets better…if you want to repay the amount owing in 6 months, they offer 0.5% per month. Slightly lower but every penny saved is a penny earned.

Similar to Hong Leong Bank, HSBC Bank also offers 0.5% per month on your newly transferred balances, to be repaid in 6 months. The minimum amount required to be transferred is only RM1,000.

Public Bank has a slightly higher rate at 6.88% per annum for up to 24 months of repayments. You need to transfer at least RM3,000 in this program. Alternatively, it also had a fixed interest rate which means you pay the interest one-time in a lump sum. This is to be paid upfront. The fixed rate ranges from 1.5% for a 6-monthly repayment, 2.5% for 12-monthly repayments and 5% for 24-monthly repayments.

OCBC offers one of the best rates around, at 0.38% per month for a 6-month repayment period. The minimum amount to be transferred is RM2,000. If I were to do a balance transfer, this would be my choice.

If you have seen, heard or been offered anything lower than this, be sure to grab it but do read the fine lines and the terms and conditions.

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Repay your debt smartly – choose the cheapest one available

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Are the banks cash-rich and desperate for business?

Penny — Mon, 24 Mar 2008 15:51:00 +0000

I own several credit cards from local and foreign banks. Recently, two banks have called to offer balance transfer programs with interest rates as low as 0.5% per month, for tenures ranging from 6 months to 2 years. There was another that offered me a higher rate of 0.8% per month and when I commented that the bank’s rate is so much higher than other banks, I straight away got offered 0.5%! After thinking through for a while, I replied that I didn’t need a balance transfer after all. Then the balance transfer was immediately switched to one where the bank will just bank in the cash into my current or savings account and I could use it for anything I wanted. The bank sounded desperate to me, to offer me so many means to take up the extra cash I didn’t want.

There’s another that sent me a cheque for a certain amount, to be repaid in six months, interest free. Of course the one-time administration charge applies and I’m guessing the bank hopes that I’ll be a bad pay-master, resulting in them earning some interests in the “free” money they pushed to me.

And then there’s yet another foreign bank that sent me a card that offers overdraft facilities. I didn’t even apply for any but they had proactively created an account for me and encouraged me to go ahead and use up to a limit of RM8,000. Mind you the interest is not cheap, it comes up to 1.4% per month, which is almost equivalent to that of a credit card at 1.5% per month.

By now you must be wondering what my spending pattern is like on all these banks’ credit cards. Let me tell you…I have their cards but they remain in my drawer at all times! Does this mean these banks have a similar strategy in targeting non-swipers?

Anyway, judging from all these offers coming my way, one can conclude that the banks are facing intensed competition these days. Interest rates for loans are coming down and those offered for deposits are getting better. Bad news for the banks, but great news to the consumers!

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Are the banks cash-rich and desperate for business?

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Another investment to come

Penny — Thu, 27 Dec 2007 15:00:00 +0000

We’re thinking of a new, huge purchase – a car. It’s going to come in handy right now since we’re finding our regular car to be getting a tad too small for all the stuff we gotta lug around whenever we travel.

I hope our car loan will be competitive in terms of interest rates, to make this a good investment decision.

AmBank seems to be the more popular lender for car purchases. The other popular ones include Public Bank and Maybank. Let’s cross fingers and see who offers us the best deals.

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Another investment to come

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Penny Sense » Loans

Lower interest rates to come

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