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Need immediate cash? Seeking a away to simplify your finances? Well, with debt consolidation through cash-our refinancing, you can have both!
But what exactly is debt consolidation in Malaysia? Before you decide to consolidate your debt and cash out, you should understand what it is and how it works.
Essentially, debt consolidation means paying off your two or more existing debt with a new loan. This consolidates your old debt, so you don’t have to worry about repaying individual debts with varying interest rates and fees.
Of all its benefits, perhaps the more attractive one of all is the financial relief of significantly reducing monthly repayments.
So, let’s go through the ways you can consolidate debt and see why cash-out refinancing is the ideal choice to achieve your goals and cash out now!
Ways to Consolidate Debt through Mortgage Loans
1. Cash-Our Refinancing
Cash-out Refinancing is helpful for individuals with significant debts, provided that they have sufficient equity in their home.
To illustrate, here’s an example:
In this scenario, you can refinance a home valued at RM300,000, where you still owe a remaining RM100,000, Due to the 80% loan-to-value ratio, you can take out a loan amounting to 80% of the RM300,000 which is RM240,000. Consequently, the amount you get to cash out is RM140,000 after deducting the outstanding RM100,000 from the RM240,000 loan.
You can now pay off the debt with the RM140,000 cash-out. Ultimately, you’ll be left with a new monthly mortgage payment with a lower monthly installment than you did before.
While cash-out refinancing is a greater option for those wanting to reduce overall debt, it’s essential to compare the interest rates, repayment terms, and fees. That way, you ensure that you pay less in total interest payments in the long run.
2. Top-Up Loan
While they may seem similar, the top-up loans are not to be confused with cash-out refinancing. With cash-out refinancing, you replace your original mortgage with a new mortgage, ideally at better terms and lower interest rates. On the other hand, top-up loans are separate loans offered against the equity in your home.
So, if you have RM200,000 in equity, you could open a line of credit to pay your other debts. This option of debt consolidation in Malaysia is suitable for those who already have an affordable housing loan with a decent interest rate.
Why Cash-Out Refinancing is Ideal for Debt Consolidation
There are several reasons why cash-out refinancing is the better alternative than a top-up loan.
Cash-out refinancing pays off your existing housing loan and provides you with a new one. Meanwhile, top-up loans add a second payment on top of your existing mortgage.
Typically, cash-out refinances have lower interest rates than top-up loans.
The value of your property determined by the bank may be higher because different banks have different valuers. So, your chances of getting a higher loan are also higher.
Unlike with top-up loans, you can compare the interest rates between the banks with refinancing. The lower the interest rates, the lower the repayment period and financial burden placed on you.
In general, each bank has its own set of requirements for approving your application. If one bank rejects you, you can try different banks until your application is approved. Unfortunately, such is not the case with top-up loans.
For a better idea, here’s how we help one of our clients consolidate their debt.
For Example
Encik Zamri and his wife, Puan Masliana, wish to not only prevent the foreclosure of their home but also pay off their debts and have extra funds to invest in his business. . Hence, he decided to apply for a cash-out refinance. However, his application was rejected by the bank.
We helped Encik Zamri and Puan Masliana to obtain a loan successfully:
The Pros and Cons of Debt Consolidation in Malaysia
Should You Consolidate Your Debts?
This would depend on your financial and personal circumstances. With that said, here is when debt consolidation is a smart move:
When it saves you money in the long run (i.e. in total interest).
If you can afford to pay your new monthly repayments on time.
When you need to shorten your monthly instalment period.
If you need additional cash flow.
On the flip side, here is when debt consolidation is not advisable:
If you cannot afford to pay the monthly repayments.
If you face issues with impulse buying.
How Citywide Advisory can help you
It can be tricky to manage your significant debts and find the best way to consolidate them. Cash-out refinancing for debt consolidation in Malaysia may be the easiest way to access money, but your approval is not guaranteed. This is where Citywide Advisory come in to help you with your refinancing for debt consolidation application.
Personalised Loan Consultancy Services in Malaysia
Citywide Advisory is the BEST loan advisory service in Malaysia.
Citywide Advisory also offers personalized loan consultancy services, helping clients understand and improve their rejected loan applications for refinancing housing loans and more.
We customise our loan recommendations based on an individual’s needs, considering factors like:
The specific loan amount you require.
The urgency with which the loan amount is needed.
Whether you or your parents own a property that has been held for over ten years.
Your income level.
Your CTOS score (such as your credit score and credit history).
Our goal is simple: to help you find the right loan solution, paving the way to financial stability and debt freedom.
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