PFIOL = prem financing interest-only loan
Wayne pointed out “interest-only” is quite common wherever lender owns an insurance policy as collateral. I am the beneficiary not the owner of the policy.

Q: why this PFIOL is acceptable while others aren’t? Actually I don’t remember the others in detail

• A: current LIR is high, so I can easily visualize high LIR. Worst-case plann is easier.
• A: pay_down is easy and free. simplicity
• A: I can liquidate full policy after 36M. Prison term is shorter. simplicity
• A: loan quantum is relatively small
• A: no currency risks
• A: LIR risk is “contained” within the final 14M window… simplicity

Q3: pay_down? See quote below
A: Note the first 2 of the 3 windows have good LIR. During the 3rd (final) window, if LIR skyrockets, I ought to pay down, perhaps using the first FLI2, or my USD (around 200k), provided by then I have yet to deploy USD elsewhere
A: After prison term, I think I should pay down iFF I have too much idle cash and unable to genertate 2.77 ppa (an hypothetical LIR).

Q3b: Both loans carry the same LIR, so pay down which first?
A: FWD, because I may soon surrender this one, and keep FLi250 leveraged.
A: FLi250, to protect this deal from default hazard

— COF is the overall cost across the CIMB buseiness.

🙁 COF is opaque, not as transparent as Sora.

👍 COF is stable… Sora is too volatile for the lender, so a thicker buffer (1 ppa spread) is imposed.  As of Nov 2024, for all-in LIR, Sora is worse than COF.

CIMB offers COF to loan customers as an option. If uncompetitive, customer can choose Sora, or customer can pay off the loan or default.

As of 27 Jan 2025, COF is 3.09 ppa.

— GIRO .. Repeated Giro failures would prompt Cimb to terminate the loan via policy surrender. (Annual prepayment is not an option.)

Scheme 1 .. To minimize monthly operational risk, I can switch to FWD monthly payout option. I will only withdraw surplus balance from PFSA [PremFinancing service acct] once a few months.

Scheme 1b .. after I receive each annual payout, I will withdraw surplus and leave sufficient balance for 12M

Current Scheme 2 .. Remind myself (gCalendar?) to top up PFSA periodically (quarterly?) and monitor PFSA balance as part of recon.

— I Looked into why (based on 3% loan rate for the final 19M) the net loss is so much higher than in the Singlife deal. I think the main reason is … I’m paying CIMB 6 months of additional interest. 3% x 190k for 6M = $2850 of additional interest. This $2850 is partially offset by a higher upfront rebate (1.87% vs Singlife 1.37%) and higher annual payout rate (3.38% vs Singlife 3.21%)

Actually, I will have more than 228k idle cash sitting in some bank accounts. During the final 14 months, I might be willing to keep the 228k loan at 3% LIR, and simultaneously earn a higher DIR. This /stance/posture/attitude/perspective/ might help cushion the pain and regret of “exit FWD deal at a loss”. That’s Scenario A.

Here’s Scenario B. The earliest exit time is Nov 2027 for FWD. If in early 2027, I foresee that I will exit ASAP, and I can’t earn a better DIR than LIR, then I would sink in up to 228k to pay_down (or even wipe out) the loan. This will make the end-to-end PnL positive (or less negative :). I think this is viable, according to the email thread “loan pay-down i.e. partial pre-payment”.

However, the bigger my total PFL quantum, the heavier is my debt burden, the slower I could pay_down. I would probably surrender my very first FLI2 for pay_down. 

Penalty for prepayment? See loan offer letter. Two scenarios — 1) within free-look period 2) short-notice. Silvester replied that

There’s no lock in for the loan and you can choose to redeem anytime. However, there is a 1 month notice period for partial repayment, and 3 months’ notice period for full repayment. Since there’s no limit to partial repayment, if such events were to occur, you could partial pay off majority of the loan after 1 month. It will be left with $10k as the remaining loan which you are able to pay fully and redeem your policy 2 months after your partial payment.