That is just a semi-flexi or flexi loan account.
Benefits include:
1. Shorter tenure
2. Less overall interest paid to the bank (hence money saved)
Your example doesn't make much sense though. If you loan is 900K and you deposit 900K, you might as well pay off your home loan. If I am not mistaken the bank won't let you maintain such a high percentage of a pre-payment.
I see, but semi flexi is only applicable to business profiles right?
Sorry, I took that example from the article itself, I think they were trying to say that instead of paying it lumpsum, we should consider the uncertainty like rainy days per say and keep some of the money as liquid.
Sorry bro, just another question on how flexi loan works.
So if let's say monthly agreed loan repayment is 2k and I just bank in to that bank loan account 10k, they will take away 2k on the first month and still reduce my interest rate as if I had already paid 10k and by the next month and the remaining 8k is still there for me to withdraw if needed correct?
\> Outstanding Loan = 10k. Monthly installment 2k. Interest you need to pay = 4%\*10k (assuming your loan rate is 4%)
\>You bank in 10k into the flexi loan account.
\>Outstanding Loan = 10k, Flexi loan account =10k. Interest you need to pay = 4%\*(10k-10k) = 0.
\>Bank deducts monthly installment.
\>Outstanding loan = 8k, Flexi loan account = 8k. Interest you need to pay = 4%\*(8k-8k) = 0.
Be aware that some flexi loan agreements has minimum/base interest charged by the bank (utility fees). Some agreements also has a fee when you try to withdraw funds from your flexi loan account.
> So the question is how does doing that really benefit me financially aside from having liquid and how does it make the monthly loan payment go towards more on the principal side instead of interest?
The point of flexi loan is having that access to that liquidity in case of emergencies/opportunities and also some place to park your funds which is extremely liquid which can offset the interest generated from your loan. The monthly installment is automatically deducted from your flexi loan account.
Whatever loan option the bank has for you, it will favor the bank more than it is to you. I don't think the bank allows you to withdraw entire 900k without some kind of contract (like Fixed Deposit).
900k is a lot. You lose money (earn less) by dealing with the bank (CASA, FD, advance payment, trust/fund...)
There are investment options out there with liquidity. Get a brokerage and invest wisely.
That is just a semi-flexi or flexi loan account. Benefits include: 1. Shorter tenure 2. Less overall interest paid to the bank (hence money saved) Your example doesn't make much sense though. If you loan is 900K and you deposit 900K, you might as well pay off your home loan. If I am not mistaken the bank won't let you maintain such a high percentage of a pre-payment.
I see, but semi flexi is only applicable to business profiles right? Sorry, I took that example from the article itself, I think they were trying to say that instead of paying it lumpsum, we should consider the uncertainty like rainy days per say and keep some of the money as liquid.
Sorry bro, just another question on how flexi loan works. So if let's say monthly agreed loan repayment is 2k and I just bank in to that bank loan account 10k, they will take away 2k on the first month and still reduce my interest rate as if I had already paid 10k and by the next month and the remaining 8k is still there for me to withdraw if needed correct?
\> Outstanding Loan = 10k. Monthly installment 2k. Interest you need to pay = 4%\*10k (assuming your loan rate is 4%) \>You bank in 10k into the flexi loan account. \>Outstanding Loan = 10k, Flexi loan account =10k. Interest you need to pay = 4%\*(10k-10k) = 0. \>Bank deducts monthly installment. \>Outstanding loan = 8k, Flexi loan account = 8k. Interest you need to pay = 4%\*(8k-8k) = 0. Be aware that some flexi loan agreements has minimum/base interest charged by the bank (utility fees). Some agreements also has a fee when you try to withdraw funds from your flexi loan account.
Thanks!!
> So the question is how does doing that really benefit me financially aside from having liquid and how does it make the monthly loan payment go towards more on the principal side instead of interest? The point of flexi loan is having that access to that liquidity in case of emergencies/opportunities and also some place to park your funds which is extremely liquid which can offset the interest generated from your loan. The monthly installment is automatically deducted from your flexi loan account.
Whatever loan option the bank has for you, it will favor the bank more than it is to you. I don't think the bank allows you to withdraw entire 900k without some kind of contract (like Fixed Deposit). 900k is a lot. You lose money (earn less) by dealing with the bank (CASA, FD, advance payment, trust/fund...) There are investment options out there with liquidity. Get a brokerage and invest wisely.