Hi i recently received a text from Bank Rakyat personel offering overlap loan. Out of curiosity and since ive applied personal loan before this and having other loan commitment ive decided to call them.

So what I was offered, im not quite sure whether its good or not. Thus, here I am, asking experts here for some feedback.

Below are roughly my commitment:

Car: Rm970(6 years more)
Credit card: Am paying average rm800 a month(should be up to 15months or less if i decided to pay extra),
Ptptn Rm33k some more with monthly of rm300(not sure when will end).
personal loan that i unfortunately took during my younger years about rm770 a month with remaining of rm71k(with 9 years remaining)
House, rm1200/ a months

In total i am paying: rm970(car) + rm1200(house) + rm1800(other commitment) about 55 per cent from income.


For first option: The bank offer me rm160k for no reason with extra cash in hand rm40k, after they overlap all my commitment besides car loan.

If i take the overlap loan ive to pay rm1,800 a month for ten years + rm970 for car.

Or second option: Rm125k with rm5k extra cash in hand for Rm1,400 a month also for ten years.

If i take these two options: I have no more commitment on credit card which i have outstanding of about rm12k, ptptn, previous personal loan of rm71k.

Im a big spender i admit, my mistake that i did without thinking during my younger years. I am just 29 this year.

Without the overlap loan, i think i still can pay the commitment fine. But the offer for overlap loan kinda good too.

But i dont know, what will it fo to my credit record. Can i still apply for loan later on if I needed?

I need serious response

This post has been edited by thinkthink: Apr 5 2016, 11:01 PM

What is overlap loan? is it just another way of selling personal loan?

Anyway, instead of looking at loan commitment amount, actually you should be looking at interest rate, savings in early loan settlement, etc.

and also, looking at your history, doesn't seem like the best of idea to get a loan to cover another loan.

For the loan that bank rakyat offers you, based on my calculation, it is 3.44% flat rate, which means effectively it is at 6%+ p.a.. At this rate for a personal loan, i believe it is as low as it gets (not too sure, never needed to apply for personal loan before).

Now, your personal loan that is 770 per month, what is the interest charged, repayment period, etc...?

As for your credit card, what is the outstanding balance.

i'm not great at calculating these things, still learning, but the idea here being that
1) if your new loan offers lower interest rate compared to the interest of your personal loan and credit card loan, then might be OK to get it.
2) the consideration is how the new loan can create savings for both your cc balance and your current personal loan. if at the end of the day, you do save a ot of money, yes. so herein lies what terms and conditions of the previous personal loan? don't need to know about CC, cause that's 18% daily, known fact.
3) at 3.44% p.a flat rate, EIR 6%+ though, the rate is definitely higher than your ptptn loan, so no, don't use it to cover your ptptn loan.

Is it that hard to make the choice? You mentioned that you somehow regret about what happened when you are younger.

Shouldn't your priority is to get out of debt as soon as possible? or you still stuck somewhere yesteryear?

(800x15)+33,000+71,000 = existing repayment

1,400x120 = new plan

Your call?

For personal loan, foolish of me was i agreed loan amount 80k loan for 15years!!😣Not knowing that itll haunt me afterward. Its about 4.95percent interest if am not mistaken? After a long 5 year and half now, i still have remaining of rm93k for about 9 years and half to go. If full settlement now I have to pay rm71k.

For cc, as i mentioned above, im paying about rm800-1k a month. I stop using cc already since i have outstanding of about rm12k. I can settle paying in 15 months?

As for ptptn. Well its true also that the interest is lower than the overlap loan. But on the bright side, i dont have to pay for it anymore if i accept the overlap loan offer. This, i can settle in say 8-9 years?

If my calculation is right. By taking the overlap loan of rm125k. I would save better.

Regardless of any interest rate, it's never at your advantage to take a loan to cover existing loans.

Unless, there's a huge rebate in lump sum settlement which is rare.

Bank Rakyat is not a charity organisation. To takeover considerable risk, there's definitely satisfactory return for them.

But those amount only if i made full settlement. If i continue paying monthly. It should be more or less like below:

Rm37-39k(ptptn + 1 percent interest) + rm91k(personal with interest) + rm12k not including interest which i dunno whether itll increase every month due to interest.

But its true, still the full loan would be considerably lower than the new plan

What if you have hiccups with your new plan? There's additional interest as well.

You are paying myr800 / month for CC and should be cleared within 15 repayments? So, what's the issue?

What's your monthly repayment for PL and for how many months more?

For PL it shoud be close to 120 months still

i think you really need to clear your head and see what you have mentioned... taking a higher interest loan to cover a lower interest loan is definitely NOT a bright side.

the problem with your calculation is you compare the loan repayment amount of BEFORE and AFTER... which is not the right way to go... 1800 vs 1400 but this is not over the same time period.

point made by another forummer which i forgot, is that chances are by settling your previous personal loan, you probably don't save much.

you end up in longer loan. longer repayment period.

Apologise for not having a proper read on your first post. I reread it.

So, it's

(800x15)+(let's make it 40K for PTPTN)+(770X9 years or 108)

against

1400 x 120

anyhow, it's your call. I'm only 2 years older than you yet, I'm debt-free and owns a considerable amount of assets to sustain my current lifestyle. (I'm not really working at this moment)

my point is managing your debt is important, don't let debt hinder you from greater things.

This post has been edited by Hun Eung: Apr 6 2016, 12:09 AM

As im typing this frm my phone, i wont type a detailed calculation neither did i do one.

But years of experience tells me the most optimum choice for your money is to take just enuf to pay off your entire CC debt and keep the loan tenure as short as possible at a similar interest rate that they are offering.

Then you will come out ahead.

First option is obviously better,
With 40k on hand, if got retrenchment within this year's, you still can pay back the loan for few months.

seriously?But i was thinking, y should i take it in first hand. If i have nothing to spent on, the 40k extra would be just an excess baggage

Good for you, I might only be out from debt, if i can manage to earn extra money other than just monthly salary.

I think longer repayment period with lower monthly commitment would ease my pocket a bit. What am thinking right now is to get the loan, just to cover other commitment besides Car and PTPTN which obviously has lower interest rate.

don't dig a hole on yourself TS

settle your all loans first before going for another loan

digging a hole before you fill em up will lead you to another deeper hole

1st question..are u a govt servant? coz u can nego better rates

i will give u the answer u wanna hear. seems u really wanna give the bank rakyat guy the commission..lol

u can consolidate ur debt into one debt

but just only the ptptn and the other personal loan. make the new loan tenure at 9 years.

no need to do for credit card as it will be finished in 15month time..why the hell u wanna drag that into 9 years unless ur an idiot (i hope ur not)

looking at ur spending i reckon u love to use future money..so yeah plan ahead yar

btw we are at same age...lol

This is why you end up in this problem in the first place, correct?

this mentally is not right. you really will end up for working for the bank.

Taking new loan to cover old loan as mentioned by another, is only beneficial if you do get savings for early loan settlement. The thing is, you haven’t done this calculation.
Like someone mentioned, probably getting the personal loan, just enough to offset your credit card debt, and keeping your loan tenure as as short as possible may create savings in terms of interest in the long run. As for your personal loan @4.95%, getting another personal loan to cover, may not create savings… may even incur more interest cost over the long.

Now you are paying all the installments without delays, right? If yes, please take the loan, bank needs your money, I also need people like you in order I can enjoy > 4% of FD interest rate.
I always envy people that can take high loan amount as I'm not entitled to.

This post has been edited by supersound: Apr 6 2016, 12:23 PM

Concur with above reply.

Why do all the thinking and calculations now on what will cost less when the goose is cooked? All the loans are commitments with fixed monthly installments; so why take the loans if you can't keep the commitments and are now trying to find ways to lessen the commitments?

If cannot stand firm, this attempt in reducing the monthly installments (and increasing the loan tenure) will be an ongoing activity.

The loans are agreements with the bank; isn't it a bit too convenient to forget about the bank's help when you need the loans and now trying to lower their business profits?

The only debt that is not a fixed monthly installment is the CC debt - which can be closed at any time. It should also be having the highest interest cost, so clear this first. Bear the pain and pay as much as you can instead of just the minimal every month, and clear it as soon as possible.

If you seriously need another loan to clear it, then do it. But think first whether you can commit and keep to the commitment of another monthly installment.

This post has been edited by j.passing.by: Apr 6 2016, 04:19 PM

Hmm..r u being serious?cause i cant figure it out sarcasm is it :hmm:but on serious note, i do pay my commitment without delay so far as i can remember

This post has been edited by thinkthink: Apr 6 2016, 05:16 PM

Yes sir I am. What I planned was otherwise. I was thinking to use the overlap loan to settle the CC(I might be an idiot to do this, but is it?), maybe some of the PTPTN and personal loan.

You shall know how much interest you are paying for nothing from personal loans and it is very bad on financial management, yet you refuse to learn from mistake but instead looking for people to support your move to retake personal loan again.
Since you refuse to learn from your mistake, then why open a thread and when people are telling you how bad such loan are, you still want to more people to support taking overlap loan are good. So why would I waste time to educate you?

I am obviously not asking for support, am here to get feedback.

Please disregard supersound. He is known to be a bad mannered and self-conceited person with generally unhelpful comments.

Let me help you with approximate calculations based on the limited info you provided:

First off, it's important to note that Simple Interest (used in car loan, PTPTN, and personal loans) is different from Effective Interest Rate (EIR). So we have to convert all of them to their respective effective interest rate.

I used this conversion calculator to do it for you. But I had to approximate some of the parameters (e.g. tenure, interest rate, loan amount) somewhat.

The approximate EIR for each of your existing facilities are as follows from most exp to cheapest:

1) Credit Card
- EIR = 13.5% - 18% p.a. (depends on your repayment history)
2) Existing Personal Loan
- EIR = 8.71% p.a. (I used RM90k, 15yrs, 5.3% to calculate)
3) Car Loan
- EIR = 6%-8% p.a. (I used RM80k, 9 yrs, 3.4% to calculate)
4) Housing Loan
- EIR = 4.3%-5% p.a. (based on current market rates)
5) PTPTN
- EIR = 2%-5% p.a (depends on your repayment scheme)

As for your new offers:
Option 1 - EIR = 6.29% p.a. (RM160k @3.5% for 10 years)
Option 2 - EIR = 6.19% p.a. (RM125k @3.44% for 10 years)

At this point, it is obvious that the new P Loan offers are only cheaper than your credit card and existing P.Loan (maybe a small chance your car loan too), but more expensive than your Housing Loan and PTPTN.

However, you must know that there is some price to pay for early termination of a Car Loan and a P.Loan, which will likely not make it worthwhile to pay off these 2 loans early (Read: Rule of 78)

Hence, if for those offers, I would recommend to borrow only just enough to clear off your credit card debts and nothing more.

That way, you will come out ahead.

This post has been edited by METALRAGE: Apr 6 2016, 08:54 PM

Just by reading this statement already can tell you know nuts on settling loan early.
Indeed there's "penalty" on settling a loan early, but there's still savings.

Of course there are. But how about you do the math for TS case and tell me if it ends up being worth while to take up the new loan to settle the car loan and existing ploan early? Which is what he is asking.

I rest my case.

Thanks for ur detailed response, highly appreciate it. I would say me as I think most Malaysian, are not literate on this kind of thing. What i care the most is affordable monthly comitment, not knowing that ill be paying almost 35% extra for full tenure due to interest.

Your suggestion i will take into serious consideration

With his guide, that's why now Malaysian are at 89.1% debt/GDP, highest population in Asia that having debts over income as a third world country

do the debt consolidation only if the interest rate on this is overall lower than the ones you are having, if they are - then owing 1 bank is better than owing 5 other banks

consolidate it and like one said - only take enough to cover the loan amount, the unecessary cash is not worth it, unless u wanna take that and cover your car loan as well, but for that you are still short of 30k

at 29 now, i would assum eyou were maybe 27 or 28 when you took that 980k personal loan, thats really alot for that age

Basically Malaysian prefer to make debt rather than savings first
If were to settle bad debts(Personal, car and credit card loan), better borrow from family members.
Taking 1 loan to cover another are stupid idea to begin with, unless the effective interest rate are 50% cheaper than any of the bank's saving accounts interest rate. If the savings account interest rate are 2% PA, the new loan's EIR shall be 1% max. Remember, old loan you already pay interest and retake another loan you are paying new interest again.

You must be a special kind of thick.

Paragon of the saying "You cannot add to a cup that is already full".

Roflmao

Somewhat agrees with you; generally, financial savviness is rubbed off from immediate family members and close friends, and if it is not found within this closed circle of relatives and friends, it is easier said than done "better borrow from family members" as all could be in the same boat.

The damaged was already done once the loans was signed, as the bulk of installment payments in the first several months/years was for interest payment. So how much would one really saves by using a loan of lower interest to replace another loan? I doubt there would be hardly any difference, especially if the installment is lower than the previous installment such that the tenure would be longer.

7-9 years car loan. Damage already done. Convert the flat rate interest to effective rate to know the true cost of interest. Read the rule of 78 on how much is the outstanding balance if to fully pay and terminate the loan. Basically, would only end the loan immediately if a cart load of money suddenly dropped onto my lap.

Same with personal loans with flat rate interest. Unless of course there is a guardian angel who can provide help with very low or no interest.

As for housing loans, damage already done when the longest possible tenure of 30 or 35 years was signed. Why the longest possible tenure? To have the highest possible loan amount with the lowest possible installment. Again, the bulk of the interest cost is in the first several years; the lowest possible installment would hardly cover the monthly interest.

Ideally, it should have been paying the highest possible installment when taking any loans. Not the lowest possible.

Consolidation of loans. This is only applicable if there are 2 or more credit card debts, where the outstanding balance of the higher interest card is transfer to the other card.

I doubt it would be applicable to consolidating several personal loans by getting another new loan. It could be merely for the sake of convenience of paying one installment instead of several times a month. It could be worse if this one big loan is defaulted; while previously there was an option to delay payments on the loan with the lowest interest when there is inadequate money to pay all of them.

=============

Above is out of topic, no reference to TS situation... my 2 cents on TS situation still remains as in previous post... tighten belt, bear the pain and continue on with the existing loans instead of thinking too much. It's only about half of his income.

Practice makes perfect. To live within our incomes need practice too; and it is better to start immediately without any further prograstination. Once the cc and personal debts are ended one by one, and if the changes in budgeting practice still remains, the 'installments' would continue on as 'savings'.

This post has been edited by j.passing.by: Apr 7 2016, 07:07 PM

Well, this is the best you can do? Can't find any reason already then continue with personal attacks. What a loser.

For me I'll still settle the shortest loan first as it can ease up my budget.
Still preventing taking bad debt loan in the first place are important.
For 7 years car loan, if you settle it earlier say 5 years, you still have 1-2 years of savings. I know this as i just settled my car loan recently, just because of I settle it on 13th month from a 5 years loan, I only get 3 years of savings as the bloody interest are charged upfront.
That's why I once again has no loan to serve, I know how to set target and spend by my means

Thanks for the lenghty response, really appreaciate it and i will definitely consider it. Taking another loan to overlap my existing one had never been in my mind. But after I was offered by several banks now it made me thinkng.

Today, the banker call again and said will try to arrange the lowest possible rate. For now the offer stand at rm160k/125k for 10 years at 3.9% interest.

For all I know, a loan is not free money, tho it settle my previous loans, it doesnt made me loan-free. Total commitment might be lower 10-20% per month, but the loan period tho which i think i have to think a lot whether or not i should commit.

By lowering monthly commitment, the extra money I could use for something else? I think?

This post has been edited by thinkthink: Apr 7 2016, 11:07 PM

I advocate financial prudence as a way of life.

But financial prudence =/= financial literacy. There are inaccuracies in your post i have to point out for the benefit of other forumers so tht such inaccurate understanding doesn't perpetuate.

Your views on early settlement of certain loans are correct. In that it may/may not not be the optimal thing to settle early because of how interest is appropriated over the lifespan of the loan unfairly. So a calculation at the point of settlement is necessary to find out.

But this is not the same for housing loans and credit card debt. Any point at which you decide to settle completely, you will not have paid a single cent more in interest than was as per the stated interest rate.

In plain english, if you settle your house loan or credit card early, your potential savings = the stated interest rate.

But if you settle your personal loan early, the calculation for potential savings is less straightforward. Though it isn't that difficult either.

If I were you and really wanted to change:

1 Stop thinking about taking more loans or loans to replace loans (especially ones that give you extra cash)

2 Start thinking on how to pay back your existing loans as fast as possible
2a Think on how you can cut your current spending even further, then use any extra money you can spare to pay back your cc as soon as possible.
2b Think of downgrading your car. How much can it save you if you sold of your car and got a cheaper one? (think of maintenance, insurance, road tax, depreciation, petrol consumption)
2c If you can get to this stage you will be at a much better position already and can start thinking on getting rid of that huge existing personal loan.

A bit out of topic but if you dont mind, can I understand why you took a personal loan when you were younger? For what purpose? Its a sincere question and I am not judging. Just trying to understand why people take personal loans and end up in a financial trouble early in life. Thanks.

Is above a clariification of my "inaccuracies" or clarification of your first post?

Anyway, let's explain early settlement of house loan and credit card a bit further.

Credit card. Please re-read the last 2 para in my 1st post... "The only debt that is not a fixed monthly installment is the CC debt - which can be closed at any time. It should also be having the highest interest cost, so clear this first. Bear the pain and pay as much as you can instead of just the minimal every month, and clear it as soon as possible.

If you seriously need another loan to clear it, then do it. But think first whether you can commit and keep to the commitment of another monthly installment."

Early settlement of House loan. This is the biggest loan for most people in their life. And as pointed out by you yourself, the cheapest loan too. So how early settlement is early? Since the 1st portion of the tenure is about reducing the outstanding balance, and hence lowering the total value of the cost of interest. For sure we could "save" a lot of interest, if we have the money to settle it immediate after the lock-up period (if there is any lock-up period).

That is IF we have the money in hand. Or are you suggesting to take another loan to settle this cheap loan?

In most cases, the early settlement of house loan is when the house is sold. In other cases, it is in the last several years of the tenure when there is enough money to fully clear the loan, which maybe from savings or from EPF at age 50 or 55.

In the latter case, this settlement is debatable. If installments were paid in the past 20-25 years. why not continue it further the next several years? How much interest would it really save? What if a fatal accident occurs, is it worth it to terminate the loan and also the MRTA assurance on the loan?

And needless to say, early termination (and advance payment to reduce the outstand balance) of an existing housing loan is desirable when the current interest rate has changed significantly. But this re-financing; not replacing it with another loan like a personal loan.

As pointed out by Supersound, we don't have to work out all the nitty-gritty details and calculations when ball-park figures and common sense suffice. Interest free, or 50% cheaper - yes. Otherwise, don't waste time.

The answer is as above. Use ball-park numbers, rough estimations and common sense first before sweating the detail calculations. 3.9%. How much is the current interest rate? If it is not half, don't waste time figuring it out.

If you want to go down this path of discovering new and cheaper loans, there is no end to it. You are not the only person receiving these "fantastic" offers every now and then. Why waste time to entertain these type of calls and calculate the details, unless of course the offer is too good to be true. Which is often as it is, not true.

This post has been edited by j.passing.by: Apr 8 2016, 03:41 PM

The thing about finance is that there's always a precise number and is never up for debate. Everything else is noise. That number informs you definitively which decision is the optimum one. I don't expect most people to know how to work out that number.

Like you said, it is not strictly necessary. Living by general rules could be sufficient in most cases to make the optimum financial decision. Or the difference between optimal and non-optimal could be so small that it is not practically significant.

But when I spot someone perpetuating something technically unsound, I correct it for the benefit of others reading. Just like a doctor alarmed when some "expert" on the forum advocates others to be anti-vaxers.

This is not meant as an insult. Your understanding of the financial math behind this is incomplete.

---

For clarity, I never advocated TS take more loan than he needs, but to take just enough to pay off his CC. I even backed it up with a calculation.

The savings from changing a min EIR 13.5% facility to a EIR 6.xx% facility is at minimum 6.01%.

Unless TS provided the wrong details about his new loan, that is the optimal choice. It is not up for debate.

I have question tho, at the age of 20 you toke a 80k loan?

Youngsters now are not like last time. Last time is we make enough savings before start enjoying, but now time has changed and people make debts and enjoy first

make huge debts and enroll in AKPK? good idea? else just go for bankruptcy.. whats big deal for them?

People are like this now
And if a person knows how to think, he won't simply take personal loans no matter what happens.
But with Malaysians are having debt/GDP at 89.1%, this number shows that they don't know how to make a proper financial managments

lol spend on things which is not necessary like luxury item and end up in debts

some i saw in akpk only 30k debts start to enrol liao coz afraid of bankruptcy ..

im glad to see there are increasing numbers of bankruptcy each days. kudos

End of 2014 it was 75-85 a day, 2015 government chickened out to announce. This year announce 2015's and it is about 200 a day

glad to see this figures

hope 2016 increase 300 per day

Nope, should be 400

If I followed correctly should 23. Currently 29. Paid 5-6 years. 15year personal loan.

I thought max only 10 yrs?

last time p.loan can go up to 20 years.

the same year they set max house loan to 35y, is also when they set p.loan to 10 years.

Sorry for late respond, i was bz, the idea for that personal loan was to open up business, but The business was a total failure. I was too young to understand how to operate business, and to manage employees.