I intend to make full settlement for my car loan. Loan for 84mths, now left 35mths to run. but bank only deduct ard 13.8 mths interest. Is that the practise?

Take up Loan from maybank - RM80,000
Interest - 2.75%
Installment mths - 84mths
No of installment to run - 35mths
Current balance - RM39,121.10
Rebate todate - RM2,534.58


If i going to make full settlement now, i need to take up RM39,121.10 - RM2534.58 =RM36,586.52 to settle.

But how come they only rebate 13mth n not close to 35mths interest? then should i make full settlement or use the money to put at bank for interest?

Kindly advise. Thanks

Rebate is given at bank's discretion Thats why it's not a good idea to take long term flat rate loan if you plan on settling it earlier.

You can do the computation by using a loan calculator s below. Generally the banks ollow the Rule of 78 and it is accepted by BNM.

So it is better for you to know before taking a car loan and to decide. Rather too late to know after signing the terms the conditions of the HP loan.

http://www.hughchou.org/calc/rule78.cgi

This post has been edited by SKY 1809: Apr 25 2010, 05:06 PM

even personal loan also use rule78...like MBSB

You might think that each month's interest is RM183.33 (2.75% x 7 x RM80k / 84m).
So RM2534.58 / RM183.33/m = 13.825m

But this is wrong. The interest is not RM183/m. The loan outstanding amount is falling all the time, and so the interest in RM for each month is also falling.

If you had asked (at the start of the loan) "how much is the interest per month?"
They couldn't have given you that answer (RM183)
Most of the interest charged is allocated to the early months of the loan.
The amount gradually reduces as the loan progresses.

The justification is, most of your instalment payments at the beginning of the loan is used to service the interest. At that point in time, a large portion of the loan is outstanding, so there is a lot of interest being incurred. As you pay off the loan, the outstanding amount reduces, and the monthly interest (which is dependent on the oustanding amount) also reduces.

Use the loan calculator in the link provided by sky. When you type in the numbers and click the calculate button, you will see that on the 84th month, the interest is only about RM4.

The bank isn't trying to cheat you.

BTW: the rebate amount is not discretionary. It's a myth. The bank officer doesn't decide "This guy has a nice face, I'll give him a bigger discount. That one is ugly. Less discount for him". The formula on how to calculate the rebate is fixed. If you'd gone to the bank instead of asking on the phone, they could probably have shown you the table (no promises though, I don't know how different banks operate). What they may have discretion on is waiving part of, or all of, any late interest and penalties you may have incurred in your account.

This post has been edited by dkk: Apr 26 2010, 01:49 AM

Discretionary as in it's up to them to calculate it according to flat interest rate (same interest rate every month) or 78 rule (diminishing interest) or whatever mechanism they may fancy as long as it's legal

But they're not deciding that on a case by case basis. It would be a policy that is applied in the whole bank, to all it's customers. Not something they would be changing from day to day.

Most car loans are governed by Hire purchase Acts.

Some commercial vehicles may come under Leasing Agreements.

So you may trace the terms and conditions to those small prints is HP agreements.

This post has been edited by SKY 1809: Apr 26 2010, 01:42 PM

that y, bank can easily makes more money ..

bank makan bunga 1st, makan pokok later ...

doesnt hire purchase (ie. car) work differently from housing loans? i am always under the impression that you dont get much saving from settling early for car (as opposed to property)

You're correct. If both your car loan and housing loan has a balance of RM50k, and you've some extra money and want to settle it early, use it on your housing loan.