Alliance ONE account consolidates debts
Alliance Bank

The product is a mortgage refinancing service eligible for anyone who is currently financing a residential or commercial property purchase

by MARK RAO/ pic by TMR FILE

A PENNY saved is a penny earned with Alliance Bank Malaysia Bhd’s Alliance ONE Account which is geared at generating greater savings on interest paid via the consolidation of pre-existing loan commitments into one account.

But just how much can be saved using the bank’s Alliance ONE account? The product is a mortgage refinancing service eligible for anyone who is currently financing a residential or commercial property purchase.

Based on the bank’s website, customers can potentially lower their monthly repayments by 63% by consolidating or combining their loan and financing balances into one account, but it should be noted that this figure was provided solely for illustrative purposes.

All applications are subject to review by Alliance Bank and Alliance Islamic Bank Bhd for the Alliance ONE Account Islamic Financing product.

According to the banking group, the interest or profit rate paid from the consolidated account is calculated on a daily rest basis for greater savings, while a lower monthly repayment can be achieved by opting for a longer repayment period.

To illustrate, say an individual has a mortgage of 25 years and RM320,000 in outstanding balance owed, with a 4.85% interest rate amounting to RM2,350 in monthly repayment.

The individual also took out a personal loan with a five-year tenure and RM50,000 in outstanding balance owed, at an effective interest rate of 18.62% or RM1,550 in monthly repayment, as well as RM50,000 in credit-card debt translating to RM2,500 in monthly repayment.

Altogether, these financing commitments amount to a total monthly repayment of RM6,400. The Alliance ONE Account will refinance the mortgage at a lower interest rate of 4.44% over the same tenure, translating into a lower monthly repayment of RM1,765.

The outstanding amounts owed through the personal loan and credit card, a combined RM100,000, will be consolidated into an overdraft facility with a 6.88% interest rate and longer 25-year tenure. This translates into a monthly repayment of RM585.

In this scenario, the total monthly repayment under the Alliance ONE Account comes in lower at RM2,350 versus RM6,400 previously — representing 63% in savings. The above scenario and figures were provided by Alliance Bank itself.

Customers should note that they can opt to pay more than the minimum interest to enjoy further savings — higher interest costs may be incurred in the long run by paying the minimum amount only.

Other features provided by the product are a margin of financing of up to 95% with legal fees and insurance financing; a financing tenure up to 35 years; and financing options available in both term loan and overdraft facilities.

The product also offers an optional credit insurance to safeguard your property, as well as loan and financing consolidation services.

Alliance ONE Account Islamic Financing, meanwhile, comes with no commitment fee for Islamic overdraft, no lock-in period and no early termination fee.

As previously mentioned, all applications for these products are subject to review by either Alliance Bank or Alliance Islamic Bank, meaning the same credit-risk assessment applies.

The criteria typically used by a bank in determining eligibility comprise income level, repayment behaviour, individual risk profile and personal debt servicing ratio.

Income refers to a borrower’s monthly earnings, while repayment behaviour and individual risk refer to credit history or record of debt repayments, capacity to repay debt, capital, conditions of the loan itself and associated collateral.

Debt servicing ratio can be understood as the amount a borrower’s personal income will go towards paying debt instalments. This is calculated by dividing total commitments with net income and multiplying that amount by 100%.

How this ratio is calculated, however, may differ from bank to bank, while the maximum debt servicing ratio allowed by a respective financial institution also varies. Getting to know your bank is thus, integral.

Determine home loan eligibility can be done by using the eligibility calculators provided by most major Malaysian banks on their websites. Prospective borrowers can also make use of third-party platforms which have become ubiquitous in the market today.

This article is not an endorsement of any one banking product or of any product over another. It merely highlights one of the products available in the market today.