Tuesday, October 17, 2017

Getting A Loan Is Easy But Financing It Is Hard. There Are Consequences If You Miss The Payment


Buying a house in Malaysia can be quite a daunting experience for first time buyers. The process of buying a new house in Malaysia can be as tedious as you can imagine because you do not know the procedure of buying a new house in Malaysia.

You starting doing your research and look for articles that give you a guide of buying property in Malaysia. After that, you start applying for loan and finally get you loan approved.

However, paying for the home loan payment becomes more and more difficult for people nowadays, as the economy in Malaysia is going downhill as compared to the previous years. This article will guide you through the consequences if you miss the the home loan payment. 

First and foremost, you will definitely be charged with late payment charges, also know as penalty. Each bank has different penalty interest rate and differs across different banks. Let us say Tony bought a house at a price of RM600,00 and he managed to secure a 90% home loan, with a loan tenure of 30 years. As for the interest rate, it is 4.65%, with 3.9% base rate plus another 0.75% interest rate. 

1. Late payment 

Imagine a scenario: Tony was 30 days late in making his monthly payment in the first year. The bank then notified him and charges arrears on him. The arrears charged will be calculated based on the formula below with penalty charged: 

Monthly payment x 30/365 x late interest (3.9% base rate + 6.35% penalty rate) 

He will now have to pay an arrear of RM23.48, on top of the monthly payment of RM2,784.44. The total amount that Tony will have to pay the following month is now RM2,907.92 after the penalty. On the bright side, this will be a one off penalty. However, if Tony fails to make payment on before 60 days, the bank will then have the right to re-evaluate the interest rate. Another thing to take note, if Tony has another late payment again in the future, the bank will also re-evaluate and increase the interest rate. 

If the interest rate for a homeowner has been revised, he or she needs not to be too worried as long as he or she gets back on track and pay the loan payment on time. Then, the bank might review the interest rate and revert the interest rate to its original rate again, with the condition that he or she makes payment on time. Do bear in mind that there is also a possibility that the interest rate might not be reverted back to its original rate. 

Therefore, it is always good to practice making payment on time to prevent getting your interest rate increased and end up having to pay more for penalty

2. You should never miss a payment 

Being a late payer on bills will have a bad effect on your credit health, and there will be no way to fix your credit health once you are a late payer. If you are one those late payers who have been making late payments, the only thing you can do now is to make payment on time from now onwards.

It will not affect your credit history immediately as the credit history shows your transactions and activities for the past twelve months. That being said, if you start making payments on time, your credit history will slowly improve. 

Therefore,. It is always good to make payment on time. Take the example above, Tony was late in making payment once and it has resulted in increased interest rate. You definitely do not want to pay that extra money which could sum out to a big figure in the end. 

3. Struggles in making payment 

If you are not in any financial struggle and the main reason for missing payment is solely because of a busy and hectic lifestyle, you could always rely on reminder on your phone. Set a monthly reminder on your phone to remind you to make payment so you will not miss any payment. If you are not keen on this idea, you could always opt for automatic transfer from your bank account to make your home loan payment monthly. 

However, if you are on serious debt issues, you definitely will need to seek for professional help. It is reported that there are approximately 22,600 Malaysian below 35 years old have declared bankruptcy between 2012 and 2016.

Reasons for the declaration of bankruptcy were mainly the inability to pay for car loans, personal loan and housing loan. To deal with this, you could always look for Credit Counselling and Debt Management Agency (AKPK) and enrol yourself in the debt management programme. If not, you could also contact your bank and renegotiate the terms and condition. Another option will then be refinancing your mortgage to reduce your loan payment monthly.

Property consultant would also advise you to sell your house as a last option to pay for the loan. Move out instead and opt for rented unit that will not cause you financial burden. 

In conclusion, think carefully and thoroughly before making such big decision in buying a house. Always set a realistic budget and stick to it to prevent yourself from getting into financial burdens or debts.

4 comments:

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  3. nice tips... terimakasih kak mooon

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