Dear,
The imminent difference between those two package is Conventional vs islamic loan.
There's underlying difference between this 2, lets dissect it.
1. Islamic loan, you are required to pay extra 20% on the legal loan because for islamic loan, you are required to sign few more extra documentation, hence it translate into higher stamp duty fees.
2. islamic loan nowadays, most of the banks offered BBA instead of musyarakah mustanaqisah. BBA follows traditional loan structure whereby Letter offer will show total payment including interest, hence you will see a massive amount stated in your letter offer. However, there's ceiling rate 9.99% for your loan. Then what if you settle your loan earlier, what happen to the stated total payment amount stated in my letter offer? How much rebate will I received at the end? Letter offer doesn't state clearly the calculation for the rebate, hence it is quite vague.
For musyarakah mustanaqisah, it follow according the conventional loan struture.
3. Islamic loan offered by most of the banks are sermi flexi only, only Alliance banks offer full flexi islamic loan.
CODE
Full flexi:
1) current account tied to loan account
2) auto debit from current account at month end and interest is calculated based on outstanding balance minus amount in current account
3) maintenance charge of RM10 per month
4) setup/ processing fee of Rm200 (certain bank)
5)The liquidity comes in the form of an ATM card or a linked CASA account to the housing loan.
Example: You have a shop that is opened Monday to Satuday, rest on Sunday. On Saturday, you deposit all your proceeds of the week into the flexi account, on Sunday, you would save [(your-HL-interest-rate)/365]*AmountDeposited worth of interest. On Monday, you withdraw the money to run your business
6) Withdrawal of money or crediting of money through ATM,CHEQUE,OVER THE COUNTER, or online
Semi Flexi
semi flexi package typically has these features:
1) requires you to phone in to indicate the extra payment as early settlement of advance payments
2) if you fail to indicate, you will be charged 1% (some banks do this afaik)
3) if you indicate advance payment, no additional interest is saved as "advance" payment will only be credited to your loan account when it reaches your cycle date, so it is plain advance payments. and must be in multiple of your monthly payment.
4) For redrawable prepayments, you need to indicate separately and Redraw charge of RM50 is imposed (M*B charge Rm25)
5) Withdrawal of money or crediting of money through Cheque or Over the counter
4. Not all islamic loan offered by bank are lock in period waived, RHB has 3 years lock in period for their islamic loan. Weird but facts.
5. In the end, islamic loan do offered a better alternative package, but with 20% in stamp duty cost, and the offered package isn't standard across banks. Hence, you have to be aware.
Thanks for the explanation. I'm surprised that the rebate for BBA early settlement is not stated clearly as banks usually try to state everything clearly. The total payment can be frightening and confusing as I'm not used to it.
If the seller is paying for the documentation and there is no need for full-flexi, then islamic loan might be better with no lock-in period?
Jan 15 2016, 12:13 AM
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