Today, I just got called by phone from one of financial institution. She called me to introduce me with their new scheme for overlap loans. I’m not really interested about it and just ignore the explanation. Do you know what is overlap loan ? Let’s learn about it.
What is overlap loan?
Overlap or financial term “refinance” means getting a new loan to cover the old loan. Overlap has the advantage to the borrower. If the applicant has a recent debt such as car installments, credit card or have a loan with another institution, the parties will make a count to settle the loan.
Borrowers can still borrow even qualifications are up to 60%
Cash from new loan is not enough
Do not want to get fresh loan as it would increase the monthly installments and thus reduce the net wage.
Want to close the old loan because of high rates of profit
Combining all debts into one debt (debt consolidation)
Borrowers should first consider when making overlap because overlap will prolong the debt.
Usually the borrower is unable to save even cover the old loan high interest rates because the financial institution will charge a penalty if the borrower makes early settlement.
If read about the benefits and disadvantage it show that overlap loans could give more benefits. It look great but I still don’t want to make that overlap because :-
1. Why I need to make another loan at another financial institution? It will cost me to make another agreement, change my loan schedule. I’ve satisfied with my loan payment now. Paid with auto debit and cash deposit near my office.
2. There’s no guarantee it will save. Maybe some of us have been explained by the officer that it will profit you more money but is it really true? They also a profit maker and it don’t make sense the new loans is totally lower than other bank.
3. I don’t like to sign agreement. It need to read carefully and complicated. There’s a term and condition that could back stabbed us. Why adding the problem with others loan? We don’t know the regulations in the agreement in the first loan and it could make worst in future.
4. Banks is complicated and sometimes more biracial than government office. There’s many document to made for their process and it take time. You need to photostat IC, current agreement and so on. There’s also many document to send for their proof.
5. I can handle my loan payment now so why need to overlap. I just have car loan, house loan and education loan which is not more than 50% of my income. My education loan remaining is just 7,100 which I can settle it in next 2 years while my car is around 5 years and my house loan is 24 years remaining. But I still can handle it .
That’s all the reason why I’m not overlap loan. Sorry to the officer that called me. I’m not interested to make overlap now. Maybe in the future if I can’t handle my current loan anymore.
p/s :- Maybe some of the country don’t use the overlap terms..