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RICH DEBT & POOR DEBT I

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“Get rid of the debt”
“You need to pay back your study loan as soon as possible”

“Do not use credit card, you will be paying interest endlessly”

I was educated to be not in debt since young. To many of us, being in debt means you must work hard to pay back those debts. “I will never retire before I pay off my debts.” There is a big misconception of being debt free and retire. If we manage our debt well, we can still retire even we are in debt. I will be writing a series of articles on show you how to leverage on bank loan to achieve our financial goals. In fact, Smart Wealth has been helping many families get rid of their bad loan and regain financial control since 2016.

A house hold debt is the sum of outstanding of credit cards, personal loan, hire purchase and mortgage loan of a family. There are a few terms to take notes when we get the loan from bank:

Total Tenure: The months the loan is to be settled off.
Annual Interest: The percentage of interest to be pay annually.
Flat rate/reducing: The way the interest is calculated. Personal loan and hire purchase are calculated as flat rate whereby credit cards and mortgage loan are calculated as reducing basis.
Penalty: The amount of money need to be charge when the loan is in arrears. The interest will be revised to sky high if the monthly installment is not paying on time.
Due date: The date need to pay the installment. Late payment will be recorded in CCRIS.

Credit card and personal loan are referred as clean loan. This is due to bank hold nothing to lend the money out. The bank charge higher interest because when the loan is not performing, bank has no collateral to contra the outstanding balance of the loan. When a loan is not able to pay on time continuously for a few months, it is referred as a Non Performing Loan (NPL). To be continue

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