- Balance transfer, if not mistaken, refers to transferring the outstanding balance of one credit card to another.

"most of you advise to settle the PL asap"
No, any loan is an agreement... there could be penalties in terminating it immediately. See below on how much it would cost to fully settle it at once.

What is recommended is knowing what you are getting into when taking a personal loan. Think of it as necessity which you need to have... just borrow what you need to have, and not too much but just enough... and pay it back every month at the highest amount you could possibly do.

This will ensure that you borrow the lowest possible amount you need to borrow, and pay back the whole loan at the shortest possible time... and ultimately paying lesser cost of interest.

(Any "good" bank officer will offer you the highest possible loan he is allowed to, and the longest tenure possible... disregarding what you really need, and how much you can pay every month. Don't be tempted... )
- The major thing to know about a loan is whether its interest is calculated on a reducing balance or on a flat rate. (Google them for more details.) The interest on housing loan is calculated on a monthly basis on its outstanding balance.

The interest on a car (hire purchase) is calculated upfront based on the loan amount, number of years, and the interest rate, by mutliplying these 3 components.

- To settle the house loan immediately in a lump sum payment, you just pay the outstanding balance as stated in the monthly or annual statement issued by the bank.
- To settle a flat rate loan such as personal loan or car loan, you need to check with the bank as the outstanding amount to settle is not as clear cut as a reducing balance loan. (Google rule of 78 for more info.)
Do you mean which loan is less costly? To compare which has the lower rate of interest, Google an online calculator to convert the flat rate interest to a reducing balance rate of interest.

The above comparison is only good when you have yet to make the loans. To fully settle one loan and consolidate it to another loan, you will need to figure out what is the actual lump sum amount you needed to clear the 1st loan. The actual savings made might be just a small amount and not too significant.

What is more significant is the total installment amount that you can pay back every month.

1. Leverage is the use of borrowed money to make an investment.

2. It is common and not unusual to take a loan and use leverage to expand a business; such as taking a hire purchase loan to buy a new machine to increase production.

3. As this thread is on personal money matters, the type of investment usually referred to would be buying shares or mutual funds or some other investment schemes.

4. “Leftover money” is spare money or in other words, savings.
“Get the longest tenure for a lower monthly payment… so that there is some spare money to invest?”

In other words, you are asking whether you have the spare money or savings from your monthly salary to invest into shares, mutual funds or some other investment schemes.

As mentioned in the previous post, loans can be viewed as a necessity. Borrow what you need and make the monthly instalment the highest amount you could afford to pay. The loan amount and the instalment amount will determine the tenure.

Simply getting the longest tenure that is available shows that you don’t have a monthly budget on expenses. Yes, setting aside spare money for “investment” can be part of a monthly budget.

So, the monthly expenses and expenditure determines the best instalment you could afford to pay every month, which in turn determines the loan tenure. Not the other way… by taking the longest tenure so that you afford to invest.

The latter would be very close to using borrowed money to invest.

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If after careful determination of the loan amount and instalment, and it turn out that the tenure is the longest tenure, it would then be ideal to review the purchase and rethink whether you could afford the purchase – whether it is a house or a car or a holiday vacation - which necessitate the loan.

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“Using Borrowed Money to Invest.”

Bear in mind that a true investment never guarantees its returns. If it does guarantees its returns, it is usually a scam. Stay away.

Borrowed money has interest cost. The returns of the investment will have to cover this interest cost. So, what is left after this interest cost is deducted is the net return.

The question to consider and ask to your own self in using borrowed money to invest: “Do the net return commensurate with the risk taken?”

Of course the investment risk is no lesser when using own money.

The difference between using borrowed money and own money is this: own money is your spare money that you had spared for this investment purpose.

If the investment turns bad and loses money, the money is spare money you can afford to lose, and you can forget about it.

Borrowed money is not your money that you can afford to lose. And you cannot forget about it since you need to pay back the borrowed money (plus interest) to the lender.

So another question to ask your own self is this: “Am I confident and sure of the investment such than I am willing to borrow money to invest in it?”