hello, i wanna ask you guys, let say if i purchased a car with 9 years installment, after 1.5 years do you think it's worth to pay all in one short to settle the balance of my car loan? let say the balance is RM35k


thanks

a car loan isn't exactly the same as a house loan

for a car, you use hire-purchase

for house, it's sales-purchase

in a hire purchase, you'll agree to an amount, including the interest x number of repayment years, so it won't make any difference if you pay all in one big shot or if you follow the schedule

for sales purchase, it's different. interest is calculated daily, based on the remaining principal amount. and there's usually a clause which states a sum of penalty if the loan is settled in less than the minimum retention period (usually a few k's if you settle in less than 2 - 3 years)

anyhow, correct me if i am wrong. those are best to my knowledge

@lucifah,
If ur not going to be saving much interest, Y not continue the instalments? Would it not be better to haf greater cash flow? However, if U are the type [like me!] who doesn't like owing people/bankers $ and U haf the $ then by all means go ahead.

this is what im thinking now, i rather put the Rm35k to some kind of investment? maybe...

I am also nearly in the same situation except my loan is 3 years and the amount borrowed is less. I have paid at least a year and have thought about paying the rest by next month because I have some spare cash.

The most important thing is to talk to your bank that you borrowed the loan from. Like my case, they told me that if i choose to pay now I no need to pay for further interest. However, you took a 9 years loan and I am pretty sure that the interest is pretty high and there may be many TOC.

In short just talk to your bank. They are the boss.

if u pay whole shot of ur remaining loan (let say still left 3 yrs), u can request for waiver of the interest charged on that 3 years with certain penalty.

but of course if u have house loan, it is better used up to pay for house loan.

correct me if wrong

@hirota,
U prob can check with the bank if they can give u some discount if U pay off early since U still haf at least another 7.5 years to go. If they aren't gonna give u more discounts, U should consider putting the $ into some investments?

Invest your money, rather than paying back the loan. Better ROI

how much is the loan interest rate?
is is more than FD?

@ttwangsa,
If U intend to put the $ into FD, U should just pay off the car cause ur probably not going to earn much from that RM35k.

I think TS should also ask if he's got savings put aside for emergency purposes? It would be good if he can keep aside at least 6 months of expenses.

This post has been edited by tinkerbel: Jun 19 2008, 09:21 AM

IMHO .. I would still remain the amount of years for the loan to let it run .. and either make use of the RM35K for investment or savings purpose .. instead of using it to pay off the entire car loan.
Debts with the bank is always there .. trying to turn it to something good and harmless in our life should do the trick.

U could also use the $ to purchase a home?

this exactly what im thinking right now, but my gf suggested why dont settle the car loan first, so that it will reduce the monthly installment or monthly commitment instead of paying 2 loans both hse and car at the same time...

@hirota,
U won't get more than RMX loans from the bank so U shouldn't worry about the cash flow issue. However, if U are intending to borrow more $ from the bank to finance the house, they may take into consideration the RM35k loan U haf and minus that out hence for U to get that approved, U might haf to clear the existing RM35k loan.

Er.. do i make any sense?!

You do get a rebate and it could be calculated by a standard special formula.

The banks earned more interests on earlier years then ( more weight on it ) than later years. Diff from housing loan which is on reducing balance method.

Sorry i lost the formula. Should get back to you once I have it. Or else contact your banker to confirm.

This post has been edited by SKY 1809: Jun 19 2008, 11:08 AM

You will definately get a rebate from bank. example if you borrow $35k nine year for 4% interest, that mean each year interest is $1400, if you early settlement for 3 year, the bank will give u rebate $4200.
However, if you have housing loan, advice to dump your money to settle the housing loan.

@keonglck79,
Calculation of car loan is different from house loan hence that calculation of urs isn't quite accurate.

Are you sure ?

I do not think banks are so generous to get you back RM 4,200. Correct me if I am wrong.

This post has been edited by SKY 1809: Jun 19 2008, 11:36 AM

@SKY 1809,
Yeah.. they probably make U pay for early settlement *grins*

Hmm .. not a bad suggestion. But have to do some homework before really making use of the money $$ for the downpayment.
But that would also depends on the bank for the amount of loan to be assigned to you.

No, it is quite standard according to banking practice .

They earn lot of interest during the first year ( could have considered the penalty odeli ).

My last calculation was about 5 years back, a bit old to recall.

This post has been edited by SKY 1809: Jun 19 2008, 11:42 AM

just to give you guys an idea

HIRE PURCHASE (HP) LOAN is not exactly the same as SALES PURCHASE (SP) LOAN

@SKY 1809,
Well.. no point to deliberate this here. Might as well get TS to call up the bank to get the actual figure.

This is what i get when i made early settlement of my car loan previously, the bank used the above formula to calculate the rebate on my full settlement amount.
Last time i early settle my car loan for 2 year, they discount back the 2 year interest on my full settlement amount.

@keonglck79,
Did the bank charge U a penalty fee or some form of administrative fee?

No, they did not charge me any fee, mine is CIMB bank, other bank have no idea ?

@keonglck79,
Now that sure is odd but ah well.. *shrugs*

I am sure you will have to pay certain penalty fee. I did that before.

i just setted my car loan

loan amount was 68k.
+ interest was rm11k@ 7 yrs

so taotal amount is rm79K

after almost 8 months paying, i kena toto first prize.
paid of my 8 month old car cash.
bank gave me rm8K rebate

From my understanding, if you made full settlement on first or second year, the bank maybe will charge u penalty (still depend on your loan T&Cs), for my case did not have any penalty charge coz my loan is already >3 years.

---

Added on June 19, 2008, 4:32 pmWah ! u so lucky man !

This post has been edited by keonglck79: Jun 19 2008, 04:32 PM

no such thing as penalty for car loan

try to use NPV to calculate the repayment for paying lump sum now and paying continuously, compare it... u will find that it is not worth paying now (But the bank like u to do so, they can hv greater NPV)... This just my opinion

The interest charged is based sum of digits method ( if still applicable today )

1st cal the total int = total inst - loan amount

9 yrs loan , sum of digit ( 108+107+......................+1) =5886 total digits ( using spreadsheet to cal )
18 months , sum of digit ( 108+ 107+...................+91) = 1791 digits

108 ( total months for 9 years in descending )

Int earned by your bank for 18 months would be

(a ) total int x1791/5886

therefore discount given should be total int x 4095*/5886 ( interest yet to earned by bank ).

* 5886-1791=4095

though, just paying 18 months, int earned by bank 30%,

another 70% on bal of 90 months. Bcos weightage used is descending ( sort like penalty )

Correct me if i am wrong.

This post has been edited by SKY 1809: Jun 19 2008, 07:41 PM

samquah,

"Know how to calculate".

You PAID for the penalty and you do not even know it. If there is NO penalty, you should only pay around 1K for interest. But, you get 8K back. That means you pay 11K - 8K = 3K interest. The penalty was 3K - 1k = 2K.

Dreamer

@samquah,
U did pay a certain penalty I'm sure. Anyhow, at the v least U got RM8k discount.. U could look at it that way I suppose

i've settled my car full loan amount of 85k in year 2014 now receive call from inland revenue teluk intan about my payment details. how i purchase and how much i put deposit the car...where i got money to settle tht full of amout..my payslip..moreover


please advice me gor such a issues?

I thought car loan early settlement=still the same of total amount? Why settle ler?

Please correct me if I'm wrong.

well you have to inform them how you have the money to settle it then, no other way. Just need to convince them your money is legal and you did not cheat them by declaring less income and pay lesser tax.

I have done some readings previously as i was tempted to settle my car loan early as well.
You will get rebate when you settle your car early, but the during the first few years of your car loan, the majority of your installment goes to your interest and small portion goes to your principle. After a few years unto your loan, the lender would have recoup most of the interests, therefore to consumer, there is not much difference when we settle our car with a couple of years of loan left.

My car loan is 7 years, now left around 5. Worth to settle earlier?

You can try use this site to calculate. Not sure if it is 100% accurate. Best way is to call up your bank and ask them to provide the settlement amount of your car loan.

Rule of 78 shows you have paid at least 48% of the 7 year total interest.

Which means this is no point for me to settle the car loan earlier?

Btw I thought car laon interest is "already charged" and divided by months/year. Unlike housing loan that we can clear principal amout to reduce interest.

Yes its charged but interest it's not equally divided into 7 years.

Interest portion is higher at the beginning.

Is it wise to settle now?
The interest is around 3%, why don't I park my money in somewhere else instead of settle it ler?

According to bro rapple, you have paid 48% of your interest.
So you can do a calculation if you pay off earlier and save the 52% interest is better or instead of paying off the loan, use your cash pile generate more income to offset the 52% interest and earn more in the processs.

Edit to your last post: it is 3% pa but since it is calculated upfront, the effective interest rate is much more than that.

This post has been edited by justanovice: Mar 6 2017, 06:26 PM

The car loan early settlement can only be done by "1 lumsum settlement" to settle the rest of amount I owe them. Am I right?

Yes bro. Must settle 1 shot early settlement else no point ..

Thanks bro, I'll email bank to check how much of interest I can save from early settlement.

What do u think about the comparison early settlement of:
Car loan vs housing loan?

Should I use those money (car loan I owed) to clear the rest of car loan or reduce the principal amount of housing loan?

Hi all, it's me again.

My car loan info:
1) borrow 55000, 7 years loan
2) left 5 years, owing bank 51329
3) interest rate 2.99
4) total interest=11k++

Is this means I've paid off all of the interest (11k++) in the first two years? Thus this's no point for me to settle it anymore?

Please advise.

I dunno the calculation la but I loan 9 years now left 6 years balance 55k if I settle its price is only 47k.

So the savings is worth it. Please call your bank to understand more.