Flat rate loan vs flexi rate loan, which is better?

Fixed vs Flexi mortgage | blog.pfaasia.com
In this topic, we will explore the difference between flat rate (fixed rate) and flexi rate(floating rate) loans available in the financial market. In what circumstances should you choose a flat rate loan, and when adopting a flexi rate loan is to your advantage ?

Flat rate(fixed rate) loan
As the name implies, the interest rate of the loan is fixed for the whole loan tenure, what it means is that you just need to pay the same installment amount year after year without worrying on the interest rate fluctuations. 

In financial planning terms, paying a fixed installment amount also provide the comfort for cash flow budgeting purpose, while the basic salary increase over time, paying the fixed installment amount allow you better manage your finances.

Flexi rate(floating rate) loan
In Malaysia banking system, the flexi(floating) rate is a function of 
                            [Base Lending Rate(BLR) – loan spread] eg BLR – 2.3% 

The loan spread is very much subject to individual borrower credit history and may be altered if  the borrower failed to make the loan installment on time.

In the current relatively low interest rate environment, many borrowers are attracted to take up loans with the flexi (floating) rate package due to lower monthly installment. However, the questions is how long more will the interest rate remain at all time low ? 
What are the impact of interest rate movement to the installment ?Below is a comparison chart that would illustrate the difference of 2 type of loan packages.

Malaysia financial planner on Fixed and Flexi loan comparison



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