By Rosliwaty Ramly. KUALA LUMPUR, May 17 (Bernama) -- With so many home-loan products in the market nowadays, you have to be wise in choosing the one that suits you the best.Choosing the lowest interest rate obviously helps you to save money. Once you have picked the loan that gives you the best deal, then you can start planning your finances.
This will give you a clearer picture of what you can afford and what you should set aside for your long-term commitments. Whether you are opting for conventional or Islamic loan, here are some tips from the Association of Chartered Certified Accountants (ACCA) in choosing the right home loan as outlined in its Guidebook on Personal Finance.
HOW TO GET THE BEST LOAN?
* Shop around for the best loan
To get the best deal, talk to at least three banks or finance companies. This will give you a comparison on the loans and services offered.
Get information on costs, services and the extras.We have to remember, however, that some information, especially interest rates, can change daily. So, contact all three lenders on the same day to get a true comparison.
* Borrow only the amount you need and can afford to pay
Before deciding on a loan, be clear about how much loan you need and how you plan to pay it back.
The main concern here is to determine whether you can afford the monthly instalments.
The easiest way to get the figure is by using the on-line calculator available on the website of the home-loan lenders.
All you have to do is key in the loan amount, repayment period and interest rate.
* Understand exactly how much the entire loan will cost
Review the complete payment schedule. Be sure to find out how much you will have to pay in total when the final payment is made.
* Make sure that the loan fees are reasonableIn most cases, loan fees (disbursement fees, legal fees and stamp duties) should not exceed five percent of the loan amount unless you are paying more for a lower interest rate. For instance, if the loan amount is RM170,000, the loan fees should not exceed RM8,500 (RM170,000 x 0.05 = RM8,500).
* Read every word in the loan document
You should not accept loan terms just because the lender says they are 'standard'. Make sure you understand the reason for each term and its implications before you sign the document. For instance, you might want to check the minimum number of years you have to serve the loan. If you terminate the loan earlier than the date mentioned on the contract, the lender will impose a penalty that can be quite costly. The most important thing is to ask for clarification if you are not sure.