Hi, I recently took up 2 renovation loans from CIMB & OCBC for 5 & 4 years respectively. I'm paying $409.17/mth for the former and $232.02/mth for the latter. Also, I depleted my rainy day fund too.? - Seedly
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Asked on 09 Jan 2020

Hi, I recently took up 2 renovation loans from CIMB & OCBC for 5 & 4 years respectively. I'm paying $409.17/mth for the former and $232.02/mth for the latter. Also, I depleted my rainy day fund too.?

The circumstances that occurred were unfortunate but I did get a pay raise recently which brings my monthly surplus to be about 1k.

Can I enquire if I should build my rainy day fund back/clear the OCBC/CIMB loan or try to do both simultaneously?

I pondered long and hard on the options and can't decide on which. I'm leaning toward clearing off the one loan and build up my rainy day fund to a comfortable amount before trying to clear the other.

I'm in the civil service so my job's stable I guess?


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Firstly, we need to have a complete understanding on our cashflow. Through this process, we will understand our earning ability and spending habit. Here is a guide to help you: https://www.blog.pzl.sg/understanding-your-personal-cash-flow/

Next, create a detailed tracking for both of the loans and understand which will result in a greater repayment over time, i.e. higher effective interest.

Thereafter, create a budget that is capable of helping you to plan for the future. The best way to do this is via automation and this is how I do mine: https://www.blog.pzl.sg/how-to-create-a-monthly-budget/

The objective of your budget will be to clear the loan with the higher effective interest as soon as possible while maintaining the repayment for the other loan. At the same time, restrict yourself from taking up further loans or any form of debt facility.

Always go back to your cashflow and budgetting to ensure that you maintain at least the same level of surplus every month (use the budget article to help you enforce greater discipline).

Finally, yes - you should build up your rainy day funds at the same time. This will act as a safety net in case of an emergency. The last thing that you want is to be left with nothing and two debts to repay. Therefore, always have a safety net in place.

While we focus on your debt management, I will like to take this opportunity to highlight the importance on insurance coverage for yourself. While this may seem unnecessary because the focus is on loan repayment, the focus is still on you as mentioned earlier - without you as the engine to generate income, you will be left with debts. Therefore, ensure that you have the right insurance coverage. To this end, one of the most important things to do is to have a complete understanding of your existing insurance portfolio. Through this process, it allows us to understand the coverage that we have, any financial gap, as well as to find out whether we are overpaying for our insurance policies. I have highlighted the rest of the reasons here: https://www.blog.pzl.sg/why-every-client-needs-an-insurance-policy-summary/

All things considered, do proper tracking and devise a plan that is capable to help you overcome this situation.

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ūüĎć 0
Question Poster

10 Jan 2020

Thank you for your in depth reply. I’ll go do some calculations and review my finances based on your recommendations.
Pang Zhe Liang
Pang Zhe Liang

10 Jan 2020

Hope it helps!