facebookIs there such a thing as a good loan? My mum is convinced that HDB loans are good loans due to the relative low interest rates vis a vis other type of bank loans? - Seedly

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Anonymous

27 Feb 2020

Property

Is there such a thing as a good loan? My mum is convinced that HDB loans are good loans due to the relative low interest rates vis a vis other type of bank loans?

Ultimately this will decide my repayment method, whether clearing all my debt is a priority or using the excessive cash for investments

Discussion (5)

What are your thoughts?

Alex Chua

Alex Chua

27 Feb 2020

Seedly student Ambassador 2020/21 at Seedly

There are good loans and bad loans.
Good loans gives you more opportunities and profits. Good loans free up your cash flow so that you can use the money to invest. Good loan if utlise properly can generates more returns rather than cost. For example, house loan (viewed as assets), education loans, business loan

Bad loans depletes your cash flow and give you losses. Worst when loans get snowballed. For example, credit card, business loans that makes ends meet/ not generating substantial profit.

Hopefully, this can change your perspective in deciding your repayment options. There is no definite good and bad. What matters is the decision that suits you

Sharon

Sharon

27 Feb 2020

Life Alchemist at School of Hard Knocks

I've a friend who told me, that she repaid her home loan so fast that she said on hindsight she should take a bank loan, instead of a HDB loan. Because bank interest loan rates are quite low now, but X years down the road, it may not be. My parents' era is about 5-6%.

So it boils down whether you want to take this risk, what is your repayment time horizon, your job stability, and whether you will remember to do refinancing / repricing every time your current contract is nearly up.

HDB loan has its advantages. It gives you a peace of mind (you know how much you need to pay every month) and also, for bank loan, don't forget they can repossess your flat. For HDB, I'd think you can at least negotiate when it comes to that.

Generally mortgage is a good debt due to the low interest, and if you know how to invest, you can ea...

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