Gymnastics

Despite the title of this entry, my subject matter today has nothing to do with sports. It’s not that I have anything against sports, but if you must know, I was some sort of a book worm and kaki bangku at school who wasn’t any good in any physical activities. Come to think of it, it’s weird that despite lacking in agility, I took up trampoline at public school. Needless to say, I didn’t get past the stage of jump, jump, jump, aimlessly.

Anyway, DH and I are considering some kind of financial gymnastics to manage our personal finances. All these stemmed from my colleagues who are taking up Bank Rakyat personal loans to refinance their credit card debt and/or existing Bank Rakyat loan which is charged with higher interest.

We do not have credit card debt or personal loan. But we have car loans and housing loans. The housing loans are more or less untouchable, except perhaps to reduce it through EPF withdrawal or refinancing to my company’s housing loan scheme. DH’s car loan is okay, but mine is charged with exorbitant interest because of the refinancing that we had to do when I resigned from my job at Company No 2. With the slightly lower rate of Bank Rakyat personal loan, we think we could make some savings if we take up the personal loan to settle the car loan. I just found out that BSN charges a slightly lower rate than Bank Rakyat, so now it’s either BSN or Bank Rakyat. Unless, of course, if we want to sell the car in the near future, then it won’t be worthwhile to refinance now. Hmm, decision, decision.

And then there’s my FIL’s idea to use DH’s ASB certificate as a security to obtain an overdraft facility. The OD could then be utilised to purchase another ASB certificate. There are two ways to do this:

1. Obtain OD facility of say RM200K. Withdraw the whole RM200K to purchase ASB certificate. Serve OD interest out of your own pocket during the first year. From year two onwards, you have an option of utilising the dividend to cover the OD interest and make partial principal repayment. At the end of say 10 years, sell the certificate to settle the whole principal amount of the OD.

2. Obtain OD facility of RM200K. Purchase ASB certificate with an ASB loan. In the first year, withdraw the OD to cover the monthly payment of the ASB loan. From second year onwards, you may utilise the dividend for partial repayment of the ASB loan or the OD. At the end of the loan tenure, sell the certificate to settle any outstanding OD.

You can make profit both ways, but the quantum and the out of pocket will be different. And of course, success of the schemes depends on the interest rate.

At this stage, these are just ideas and I'm not sure if we'll go ahead with any of it. Let’s see if we can get out of our analysis-paralysis mode and get things done for once.