how to calculate the effective interest rate? what actually is that?

You need a financial calculator to compute effective interest rate.

don't have any formula for it? if I have the calculator, what should I press?

I think there are so many advices that confusing you.
To simplify what they talked about:-
1. Your interest rate is 3.5% which is not amortized. This is equavailent to effective rate of 7.x% as described by one of the forumer. Meaning, this is equal to 7.x% Fixed Deposit interest rate. The current FD rate is 2.5%.

2. Do you know settle you car loan earlier you can save interest? Let say u take 5 year loan and now you at 3rd year. if you settle it at 3rd year, they will fine you 1 year interest and deduct the last year interest for you. Check out the $ you can save from Hong Leong website. https://www.ecloan.com.my/calculator/loan_settlement.asp. You should negotiate with the bank regarding the fine. Anything under the sun can be discussed.

3. In order for you truely get the benefit, you need to get an investment higher than 7.x %/year + the fine if you want to reap the benefit of keeping the money.

4. If you are a person that dun like debts, you shd pay it off to clear your mind.

5. If you have an investment that can yield more than 7% and potentially go higher in future, keep the money.

Your reasoning seems a bit off. Some other forumers have given the Rule of 78 formula earlier in the thread, which when lookign through your Hong Leong website source, seems that that is the exact formula the calculator is using too.



Anyway I did some playing around with the formula, and in general it seems if you redeem your loan halfway through the payment period you are only rebated 25% of the interest.

Fine ?? Very unlikely. Car loan is under HP act 1967, There is no such provision in the HP act.

Careful with Hong Leong Bank....they will cheat you on interest when you make early settlement.

A DIRT SHITTY Bank!!!

really thanks for informing

No worry
Just complaint to BNM

ur right!
better put into house loan or stock market...

What documents need to bring to bank for car loan settlement?

Do we pay car loan after minus rebate?

Rule 78 is used in most cases but it is a bit complicated for layman to understand.
Here's some real life examples.

I intend to settle both my car loans in Feb 2014 and the bank has given me the following settlement amount if I settle before end Feb.

Car 1
I took a 6 year loan for RM 320k in Dec 2010.
Interest is 2.58%.
Amount outstanding is is RM 185k.
I have paid about 36 installments.
To settle the loan by end Feb, I have to pay about RM 174k - this figure is given by my bank.
The total interest payable is 2.58% x 6 x 320,000 = RM 49,536.
Since my loan is already half way through the interest I should pay should only be RM 24,768.
So this means if there is no penalty for early repayment to settle the loan I should pay only RM 185k less RM 24,768 = RM 160,232.
This means the penalty I am paying for early repayment is RM 13, 768 or equivalent to 20 months interest.

Car 2
I took a 5 year loan of RM 170k for in Oct 2012.
Interest is 2.32%.
Amount outstanding is RM 142.5k.
I have paid about 15 installments.
The bank told me to settle the loan by Feb, I have to pay about RM 133k.
Total interest payable is RM 19,720.
Since my loan so far is 15 months old, the interest I should be paying is RM 4,930.
So if there is no penalty I would have to pay RM 142.5k - RM 14,790 = RM 127,710.
This means the penalty of early repayment is RM 5290 or 16 months interest.

In short penalty for early repayment is high.
But I would still advise you to settle if you can.
Good not to owe banks money. Also makes it earlier to aim for you next car.
But make sure you have at least spare cash equivalent to 3 months of your salary for emergency. 6 months spare cash is best.

No documents. Just go to the bank. They will also give you a letter of release to remove the HP on your registration card.

Thanks.

Sorry if this is not relevant to this thread, just tumpang only.

Does it make sense to compare it this way?

100k car loan 7 years @2.33% total interest=Rm16310

100K FD 7 years @4.5% compounded total interest =rm36083

100k AS1M 7 years @6% total dividend= RM50363

So better to take loan then to withdraw from FD or AS1m to pay car in cash?

This post has been edited by MGM: Jan 5 2014, 07:47 AM

I just been told by bank that if pay using cheque, it will takes 3 working days.

Is that mean, I will get release letter and grant after 3 days, not after paying by cheque?

Don't worry about the release letter as you will not be rushing off to JPj straightaway.

I usually keep with my registration card and do it when I next renew my road tax.
But yes, the bank will only prepare the letter after your cheque is cleared.

Any proof of transaction like receipt, after loan settlement provide by bank?

I have settled my car loan for nearly a year and I didn't receive any release letter from MBB.

I asked if they'll issue anything after I made my last payment. The bank officer said no and just asked me to go to JPJ to get the "BATAL" stamp at the bank ownership claim.

Maybe everything is electronic transfer now.