Jul
08

Reduce Loan Tenure With 2 Easy Approaches

repayment-plan

Bi-weekly and extra payments can help to save on bank interests

When it comes to purchasing a property, it is vital to look into the possible steps to save on interests. Most Malaysian only pays a minimum loan installment every month and this cause the loan amount to double up due to the interests. There are 2 simple ways where the buyers can save money on bank interests.

 

1) Bi-weekly Payment Package
Instead of choosing a monthly installment, buyers can choose Bi-weekly installment instead. This payment method is popular in foreign countries, but not so popular among Malaysians. Instead of making a monthly payment, the buyers can pay half the amount, twice a month. Please refer to the example below. By using this method, the buyers can save at least RM42,495.71 in interest and 4.5 years on loan tenure. But everyone should be wondering what’s the catch behind this. The catch is, the buyers need to pay 1 month of extra installment per year, since the payment is calculated every 14 days. So instead of making 24 installments a year, the buyers need to pay 26 installments. Yet it does make a big differences in the savings.

 

2) Extra Payments Towards The Loan Principle
The second step would be, calculate 10% of your monthly installment and pay the additional amount towards the principle of the loan. By this the buyers can save RM78,000 interest and 8.5 years of tenure.

Example:

Usual payment
Loan amount : RM300,000
Tenure : 30years
Loan installment : RM1,520
Total interest paid: RM247,218.25

 

Bi-weekly Payment
Loan installment : RM760
Total interest paid: RM204,722.54
Interest savings : RM42,495.71
Loan tenure : 25.5 years

 

Extra Payment (10% = RM150)
Bi-weekly Loan installment : RM835 (760+75)
Total interest paid : RM169,205.85
Interest savings : RM78,012.40
Loan tenure : 21.5 years

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