Based on the loan packages that you choose, repayment of your monthly loan instalments will incur interest charged on either a daily basis (daily rests) or monthly basis (monthly rests). The principal sum immediately reduces every time a loan instalment is made.

However you may discuss with your banking institution about various ways of making your flexible loan payments as stretchable as possible such as:

Graduated payment scheme

This helps house buyers reduce the burden of loan repayment by allowing lower iinstalment payments at the beginning of the loan. However, the amount will gradually increase over time. You may find this scheme useful should you wish to allocate more funds for other purposes first.

Prepayment flexibility

Some banking institutions offer the flexibility of making prepayments or extra payments. This helps save considerable interest charges on condition that you make prompt monthly repayments.

Partial prepayment of the outstanding loan

Some borrowers find it useful to shorten the loan tenure by making partial prepayments with surplus savings or annual bonus. This effectively reduces interest charges if prepayments are made during the early years of the loan tenure. However, you may need to check with your banking institution about making partial prepayments as there may be restrictions imposed on how much you can pay.

    If you make an early repayment of your loan in full before the loan tenure expires, the banking institution may impose a penalty for early termination as it would disrupt the banking institution’s cash flow planning. The penalty can either be a flat rate or “X” number of months of interest.

    When you have surplus funds, you may want to make payments in excess of your fixed monthly instalment to reduce your loan amount. For partial prepayments, banking institutions may require pre-notification or may impose restrictions on the amount to be pre-paid or impose a penalty fee. Check whether the loan package allows you to make partial repayments and the procedures involved.

    Courtesy of BankingInfo

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