Buying a house is no longer a dream with the available schemes, such as prima, Rumah Mampu Milik Selangor and so on. However, loan payment is still an inssue, especially for young working adults. With increasing household debt, consumer spending is naturally affected. This article will guide you on the benefits of debt consolidation with overdraft.
Price of property RM450,000 Increment of property value annually 6.20% Property value in the 7th year RM685,621 Total mortgage debt in the 7th year RM414,082 LTV value 80% Available equity RM134,414 Based on the table above, if the bank offers you a bank loan for the home equity, there will be a total of RM134,414 as overdraft at the agreed interest rate when you loan with your bank.
If you have a number of debts that you would consider consolidating into a much cheaper loan, you can always consider getting a home loan overdraft facility. A home loan overdraft facility will allow you to consolidate a number of balances into one credit facility at a lower interest rate. The benefits of debt consolidation with overdraft will allow you to have the access to cash. With lower repayment monthly, you will then have more cash in your hands. Paying off your debts can be a stressful thing you encounter in life but it is still doable if you stick to paying the minimum payment every month. You could also pay off your debts faster by shortening your repayment period by opting for home loan overdraft policy to shorten the repayment period. One of the best things on consolidating the debts when you use a home loan overdraft cacility is the flexibility to be able to adjust the repayment, not forgeting the amount of interest that you manage to save. This will come to a good use especially during those months when your finance is tight. You could always reduce the repayment amount by stretching the period of your repayment duration. However, do note that you are not able to do this if you are consolidating the debts of term loan, such as your personal loan as consolidating your debts of personal loan will incure harsh fees for late or missing payments and it will also affect the credit rating. In conclusion, using your positive home equity to pay your debts is a good way to regain control of the finances. Not only you can pay lesser for your debts, you can also have a faster and shorter repayment. This will then reduces your debt to service ratio and improve your credit health.
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