In Malaysia, term loans and flexi loans are two common types of personal loans, each with its own set of features and benefits. Let’s compare them:
Term Loans:
1. Fixed Loan Amount: In a term loan, you borrow a fixed amount of money upfront. This amount is determined when you apply for the loan.
2. Fixed Repayment Schedule: Term loans typically come with a fixed repayment schedule. This means you’ll make equal monthly payments over the loan tenure until the loan is fully repaid.
3. Interest Calculation: Interest is calculated on the entire loan amount from the start of the loan term. You’ll pay interest on the entire loan amount even if you’ve repaid a significant portion of the loan.
4. Lower Interest Rates: Term loans often have lower interest rates compared to other types of loans because they are considered less risky for lenders.
5. Predictable Payments: With fixed monthly payments, it’s easier to budget and plan your finances as you know exactly how much you’ll pay each month.
Flexi Loans:
1. Credit Line: Flexi loans provide you with a credit line that you can use as needed. You can borrow money up to a certain limit, similar to a credit card.
2. Flexible Repayment: Unlike term loans, flexi loans offer flexibility in repayment. You can choose to repay more or less than the minimum required amount each month.
3. Interest Calculation: Interest is calculated only on the outstanding balance. So, if you repay a portion of the loan, you’ll pay less interest on the remaining amount.
4. Interest Savings: Flexi loans can potentially save you money on interest if you make extra payments because the interest is calculated on a lower principal balance.
5. Variable Interest Rates: Flexi loans may have slightly higher interest rates than term loans due to their flexibility.
Which Loan is Better?
The choice between a term loan and a flexi loan depends on your financial situation and needs:
– If you prefer predictable, fixed monthly payments and don’t anticipate needing to borrow more money in the future, a term loan may be suitable.
– If you need flexibility in managing your loan, want the option to make extra payments, and expect your borrowing needs to vary, a flexi loan might be a better fit.
It’s essential to compare the terms and interest rates offered by different lenders in Malaysia to make an informed decision based on your financial goals and circumstances.
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