Applying for a home loan is often a long, drawn-out process that needs to be carefully deliberated. Whether you are a first timer looking to settle down in a cozy home or an experienced investor, there are many concerns that need to be considered in order to get the best deal out of your mortgage. It is vital that hopeful home owners are able to get the loan that suits their needs as this could make all the difference between helping you save your hard earned money or losing it.  As for investors, the right loan goes a long way towards facilitating them to build up a profitable property portfolio. In order to avoid any costly mistakes, we’ve put together a mini guide to help you make sure that you have the right financing for your property.

Getting a bigger amount than necessary

Housing Loan Amount (Photo credit: beefinancesavvy.com.au)

Banks usually hand out loans based on your credit history and will be able to gauge the maximum amount that you are able to borrow. However, this can be a risky trap to fall into as property buyers are inclined to go over their budget and borrow an amount that is more than what they need. Borrowers need to do proper research on the property that they wish to purchase and aim for the types that are in their price range. Establish that the loan amount is well within the budget range so that when it comes to making monthly repayments, you won’t be paying for unnecessary interest and putting a burden on your monthly cash flow.

Insufficient financial planning

Financial Planning (Photo credit: icicibank.com)

Buying a house is all about how you manage your daily finances. Do you have the means to go about your usual lifestyle while still managing to meet the monthly schedule? If the answer is yes, then you’re on the right track. Many people do not keep track of their expenses when their monthly salary is out which can lead to problems further down the road. Another example would be putting an unsatisfactory amount in to the deposit. If your savings only allows you to put in a small deposit, banks will usually evaluate you as a high risk loan and there will be additional charges incurred such as higher interest rates. The extra leverage that a bigger deposit gives is that you can have your pick of lenders which can offer you competitive packages.

Listening to your heart, not your head

Think Rationally (Photo credit: bharatestates.com)

Human beings are generally creatures controlled by their emotions and it is applicable to house hunting as well. There is an abundance of housing options readily available but you must learn to choose wisely and rationally. This is in essence a big investment that will directly influence your future so it will be hard not to be emotionally invested when making a decision. A good way to keep on track is to prioritize the most crucial factors that you want in your house. For example, you might only want a certain location and size of the house. Listing your specifications can help you to narrow down your selections and find the best fit for you. Engaging the service of professional services such as real estate agents which will do the legwork for you can be beneficial too.

No black-and-white proof

Mortgage Loan Agreement (Photo credit: slaneymortgages.com)

So you’ve discussed all the finer details and gotten a verbal agreement. The next step is to always make sure that you get the same agreement in writing. While verbal agreements may seem trustworthy enough, you never know when things may get ugly as it is widely known that verbal agreements are hard to prove. If you’re discussing on better terms for your loan, get your loan officer to make the necessary changes in the contract before signing. If you’ve requested for some replacements from the property agent, ensure they follow through and everything is stated in black-and-white. Sometimes there may be miscommunications between you and the bank or property agents and after the property is in your name, you will have to be responsible for all repairs and payments. After all, it’s always better to be safe than sorry.

Not enough research done

Researching Home Loans (Photo credit: dnaindia.com)

We can’t stress this enough. Doing due diligence on the property, the loan terms and even the bank itself will save you a lot of time and money in the long run. Once you educate yourself, you will have the leverage to negotiate for better loan terms, prices or even request for additional benefits to be added to the house.  Make time to fully understand all the minor details in your contracts and if you have doubts, make a note to ask for answers. Never sign documents that you are not sure about and always ask for clarification if there is anything that does not seem clear to you.

Buying a house is only the most significant financial decision of your life. If you’re not lucky enough to be born with a silver spoon in your mouth, chances are you will need to apply for a housing loan in order to get the keys to your dream house. In Malaysia, there are a plethora of options from numerous financial institutions to get the mortgage loan that you require. But how do you know which one is the most suitable loan for your needs? All the legalese, complicated terms and conditions is enough to make you confused. You need to make sure that you are making the right choice when shopping around for the right home loan for you. Otherwise, you could very well end up with an unsuitable plan that could be a hassle to sort out as mortgage loans are likely to have an extensive tenure. These are some key points that will steer you in the right direction for that all-important decision.

Home Loan Types

In Malaysia, there are two types of basic home loans available for interested home owners. Traditionally, there is the fixed term loan which involves you paying a fixed sum of money each month for the entire length of your loan period. The other type is known as the flexi-loan, which as the name suggests, offers you the flexibility of reducing your loan interest. The customer ties up a Current Account to the loan and the loan amount is deducted as scheduled while additional monies will be used to pay for the principal amount. This means the more you save in the Current Account, the less interest you will have to pay. As more banks are adopting a semi-flexi property loan, it is good practice to always ask the bank officer to explain all the fine prints and request for extra benefits as you will not be able to change lenders for at least 2-3 years.

Available Loan Amount (Photo credit: westernmortgageloan.wordpress.com)

Available Loan Amount

The amount that the bank is willing to loan to you varies from bank to bank. Usually the highest amount that a bank will offer is 90% of the property’s price thus the remaining 10% will have to come out of your own pockets. Seek for the bank that offers you a higher margin if you do not have sufficient cash flow to put up on your house. As a rule of the thumb, it is advisable to opt for a monthly payment of not more than one third of your monthly income. Take into account your other necessary expenses and commitments when planning your monthly budget.

Terms & Conditions (Photo credit: telegraph.co.uk)

Terms & Conditions

Always read carefully over the contract before agreeing to take up the loan. the two most vital deciding factors when looking for a home loan are the interest rates and lock-in period. It goes without saying that interest rates are the killer that adds more burdens to loans which is why you should always choose the bank that can offer you the lowest interest rate. Mortgage loans are no small amount and just a little hike in interest rate could mean a big difference in your monthly repayments. Lock-in periods are where a penalty is incurred if you decide to settle your full loan amount before the period ends. Ensure that you have the shortest lock-in period with the lowest penalty possible in case you decide to switch banks in between your loan tenure.

Additional Fees & Charges (Photo credit: frugalqueen.co.uk)

Additional Fees & Charges

Buying a property doesn’t mean that you only have to worry about paying off your mortgage loans every month. There are any number of sneaky hidden costs that you might not be aware of just waiting for the right moment to appear. Before you manage to get the keys to your house, you will need to pay for stamp duty and legal fees for the bank and lawyers to prepare an agreement for you. it is advisable to take out an insurance policy on your house seeing as it is the most expensive investment in your life. Other hidden costs include utilities, maintenance, and penalties which you have to prepare for.

Satisfaction with Bank (Photo credit: csbcorrespondent.com)

Satisfaction with the Bank

There is no shortage of financial institutions offering different home loans that are suitable for all kinds of customers. It is possible to request for a home loan that is tailored especially for your needs. With all these overwhelming choices, it can be hard for you to settle on a particular bank. Bear in mind that you will be doing business with them frequently for an extensive period, so you should choose a bank that you will feel comfortable with. Their service and level of convenience are key deciding factors on these so that all your loan processes in the future will go smoothly.

You’re strapped for cash, up to your eyes in debts and in desperate need of some financial aid. What do you do? Taking out a personal loan might seem like a great solution to your problems where you will get a substantial influx of cash that you can do with as you please. Even better, unsecured personal loans mean that you don’t have to put up any assets as collateral thus if you do default on payments, the only thing suffering will be your credit history. Personal loans are often seen as an easy way out due to its fast approval and straightforward application process. However, before you go rushing off to apply for one, it is imperative that you know the consequences of getting a personal loan.

High Interest Rates and Payments

High Interest Rates & Payments (Photo credit: clickittefaq.com)

Unsecured personal loans tend to be riskier than other types of loans hence lenders will charge steeper interest rates. This also depends on the amount borrowed, loan tenure and most importantly your credit rating. Take note that the longer the loan length, the more interest you will have to pay. If you can afford to do so, try to get a shorter repayment period so that you won’t be paying more interest than necessary. Be sure to read all the fine prints and ask if there are any penalties for late payments so that your ability to make payments on time are not disrupted.

Lawsuits & Penalties if Default Occurs

Lawsuits & Penalties (Photo credit: chicagoagentmagazine.com)

Since a personal loan is not secured by any valuable assets, a borrower might think that they can get away with defaulting on payments with no repercussions. In the event of this situation, a creditor has the right to sue you in court where your assets might be taken into account and liquidated to repay your debts. The situation doesn’t get better either as you not only have to pay for late penalties and the original loan, there are legal fees as well. With all these happening, in the end there might be a blip on your otherwise solid credit report that will greatly impact your future financial status.

Limited & Lesser Loan Amount

Limited & Lesser Loan Amount (Photo credit: privatemoneyblog.com)

When applying for an unsecured personal loan, there’s usually a certain limit that is set by lenders on the amount that can be borrowed. Lenders might be making a tidy profit by charging you interest on the loans but essentially it could all be in vain if the borrowers do not repay the principal amount. They might resort to other measures to get back their money but it is often a long and tiresome process which is why creditors will assess uncertainties carefully and limit any risks. That’s why it is necessary for lenders to check on your financial status, employment and credit score before approving your loan.

Mountains of Debts

Mountains of Debts (Photo credit: quora.com)

There may be many reasons that a person needs to apply for a personal loan but one of the main reasons is due to unexpected financial issues that arise which needs to be solved as soon as possible. This means that the financial problem could not be resolved by your current monetary situation which suggests a deeper underlying problem. After taking a loan, it is best to look over your budget and savings to fully understand how to restructure it to be more beneficial to you. After all, if there happens to be another unfortunate financial problem, you might not be able to handle it as you are already in the midst of paying off your first loan.

Credit Rating Affects Everything

Credit Rating (Photo credit: canada.creditcards.com)

As mentioned previously, your credit score is really important to the creditors who will be approving the loan to you. Your interest rates and variable loan amount depends on this as well. There are lenders who will give out loans to debtors who have a poor credit rating but the terms will not be beneficial to them. Instead, the borrowers will receive a loan with a much lower principal and steeper interest rates in order for creditors to protect their own risks. Often, stricter terms are given so that they can secure their loans.

When all’s said and done, a personal loan can go either way, depending on your budget and repayment terms. You must ensure that you are disciplined enough to follow through on the loan schedule and make the repayment on times. Otherwise, the late fees and penalties will cause the loan to be even more of a burden to your financial situation. It is crucial that you take into consideration whether a personal loan will benefit you more in the long run or perhaps it will be better to look for other financial aid elsewhere.

If you are in tight spot and are in need of a cash boost, obtaining extra financing by applying for personal loan is the best option. Personal loans are great options when you only need the loan for a relatively short amount of time and for smaller loan amounts. On the flip side, personal loans often have higher interest rates compared to other long-term loans such as mortgages. The loan’s terms are determined by the financial standing of the borrower as well.

Get a Personal Loan (Photo credit: news.com.au)

Unlike other varieties of loans, personal loans are approved in as little as a day and once it is approved, the cash is yours to do as you please. Basically, financial institutions in Malaysia offers two types of personal loans to customers. These two types are known as secured and unsecured loans, where the most common would be unsecured loans. Revolving loans, overdraft facility and instalment loans are typical unsecured loans and the standard type of loans given out by banks. Educating yourself on the types of loans available will help you to choose which type is most suited to your needs.

Secured Personal Loan

Secured Personal Loan (Photo credit: ideapractices.org)

Secured personal loans poses less risk to the creditor as debtors will offer various valuable assets as collaterals for the amount that they wish to loan. Creditors will offer a much lower interest rate compared to an unsecured loan as they have a form of security in their hands. Borrowers beware, if they fail to meet their repayment schedule, creditors have the right to repossess the assets that were put up as collateral. Make sure that you do have the financial capability to pay the amount accordingly otherwise you will lose your assets.

Unsecured Personal Loan

Unsecured Personal Loans (Photo credit: qykapp.com)

An unsecured loan differs from a secured loan in which borrowers do not need to provide any assets as collateral before applying for a loan. As this acts as a larger risk to creditors, debtors must prove to them that they are able to repay the loan in due time. Unsecured loans tend to have a higher interest rate as well. As no assets are offered, borrowers must be able to convince them that they have a good credit history and solid financial strength. Lenders are often taking a higher risk in giving out an unsecured loan thus the interest rates and other terms of the loan tend to be less beneficial to the debtor. Even though no assets are given as collateral, lenders can still take legal action against the debtor to recover their losses if the occasion arises that they are shirking on the repayments.

a)      Personal Instalment Loan

Personal Instalment Loans (Photo credit: qykapp.com)

The most frequent type of personal unsecured loan is commonly known as instalment loans. A borrower is required to pay back a predetermined amount on a regular basis over a certain duration of time which is known as the loan tenure. There are several different factors that influence the repayment amounts that a debtor has to make. They are calculated based on the amount of the loan, the interest rate and the length of your loan tenure. After the final payment is made, the conditions of the loan are deemed to be completed and the loan is repaid in full. If there is a need for more cash, a new instalment loan will have to be applied.

b)      Revolving Loans

Revolving Loans (Photo credit: superloans.pw)

Revolving loans are typically a line of credit given to you by the bank where there is a fixed amount given but instead of instalment loans where the full amount is given, you can use any amount as and when it is needed, up to the limit given. The interest rate is only charged based on the amount taken or used, and not the full amount. Once the balance is repaid, your loan’s limit will reflect the original approved amount. If all these sounds familiar, that’s because this type of loans are how credit cards work. Banks offer you a fixed credit limit which can be used whenever you need it and the balance is paid every month. Revolving loans are flexible and you do not have to keep applying for one.

c)       Overdraft Loans

Overdraft Loans (Photo credit: investmentyogi.com)

Lastly, another type of unsecured loan is overdraft loans which is unlike instalment and revolving loans where it isn’t subject to the same rules and regulations. Essentially, this type of loan is an extension of your account. The function of this loan is to allow you to withdraw money even though the credit limit has been reached. This means that there will be negative amount in your bank account should you choose to do so. Keep in mind that the interest rates for overdrafts are inclined to be more expensive than other types of loans.

Before reaching a decision to take out a loan, go over the pros and cons and ensure that you are mentally and financially able to make regular payments.