Type of loan

If you’re thinking about getting a loan, then finding the perfect one is just as crucial as landing your dream property.
There are a huge number of available home loans currently and coming into the market and it can be difficult to sort through each once. But we can help you find the loan that you need. We can also connect you to experts who can help you fill out the necessary paperwork to get that loan quickly taken cared of.

For your reference, here are just a few types of home loans you can avail and their advantages and disadvantages.

Variable

Variable loans in Cambodia are often offered for business loans. But our network of lenders can talk to you more about getting a personal variable loan as well. What happens with this type of loan is that interest rates rise and fall, depending on changes in market interest rates.

Advantage
  • A fall in interest rate lowers your repayment costs.
  • Some lenders don’t have minimum loan amounts.
  • Full or partial early repayments often don’t come with additional costs.
Disadvantage
  • A rise in interest rate increases your repayment costs and can affect your overall budget.
  • Too much tapping into the redraw feature will eventually prolong your loan duration.

Fixed

Fixed loans means that your interest rate does not change for a certain period. So, your repayments remain the same despite interest rate changes.

Advantage
  • Your repayments don’t go up when interest rates do.
  • You can plan out your budget and spending costs throughout the duration of the fixed period for repayment.
Disadvantage
  • You don’t get anything out of the decrease in interest rate, if any.
  • You potentially pay more compared to someone on a variable loan should interest rates go down and remain down for prolonged periods of time.
  • During the fixed rate period, opportunity is limited for any sort of additional repayments.
  • You may be charged for exiting the loan before the fixed rate period ends.

Split rate loans

This loan type combines the concept of fixed and variable loans. It’s called split because you have a portion of the loan under a fixed loan type and the other on a variable loan type.

Advantage
  • Modifications in regular repayments brought about by changes in interest rates make it easier to plan out your budget.
  • Regular repayments decrease on the variable loan portion when interest rates fall.
  • The variable portion of the loan can be paid quicker.
Disadvantage
  • If interest rates rise, your regular repayments on the variable portion will too.
  • Only limited additional repayments of the fixed rate portion are allowed.
  • A penalty fee is charged should you wish to exit the fixed loan portion early.

Interest only

With an interest only loan, you simply repay just the borrowed amount interest for a period of time before paying the principal monthly repayments. This type of loans usually attract investors who are going to pay the principal once the property is sold, upon achieving capital growth.

Advantage
  • Regular repayments are lower during the interest only phase.
  • There’s a flexibility in paying off redrawing the principal if it isn’t a fixed rate loan.
Disadvantage
  • The debt level doesn’t change at the end of the interest only period.
  • If you’re not able to extend your interest-only period, you could face the possibility of increased repayments.
  • You could face a sudden increase in regular repayments at the end of the interest-only period.

Line of Credit

With this option, you will have the ability to withdraw from and pay towards the home loan monthly just as long as regular required repayments are maintained. You will also have the option to have your salary paid into the account. This loan type is recommended for people who want flexibility and a quick way to pay off the loan while maximizing their income.

Advantage
  • Income can be used to pay off a mortgage faster and to reduce charges in interest.
  • Fund access is flexible.
  • Debt management and spending can be consolidated into one account.
Disadvantage
  • There’s a risk of increasing the debt level from just a lack of discipline.
  • There are higher interest rates.

Overdraft Loan

This loan is perfect for anyone looking to loan short-term or through an emergency. This loan helps control the cash flow of businesses and cover unexpected expenses that depletes the working capital. It has the flexibility to work the way you want. Interest charged only on the credit customers used.

Advantage
  • It’s a flexible type of loan where only used credits are charged interest.
Disadvantage
  • There’s a risk of increasing charged interest from a lack of discipline.
  • You may be locked into a period of higher interest rates at the expiry of the honeymoon period.
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