If the answer is that simple, then we can conduct a poll and follow the most popular choice.

"Save interest, save loan processing fee."
If you read my previous post entirely, I've given a reason why I rather took the trouble to take a loan and pay the interests and other fees. It maybe an unfounded fear or reason, but it is a legit reason in my situation.

There is another secondary reason as well, as you mentioned 'extra surplus money'. But how do we know for sure it won't "be needed for the next 5 years or so"?

"Because you want to manage the cashflow..."
Then there is no 'extra surplus cash' to speak of in the first place. Several millions of cash in a company is not the same as another company; as it could be part of the operating cashflow.

It is his money, so who to say that another option would be better for him? Or in this case that's the individual company's money, so who are we to say or define how much is enough cash, or how much is excess cash that will be sitting ideally?

Unless we strike lottery, and suddenly comes in 'extra surplus money', then the answer is simple. Pay in cash.

But if the 'extra surplus money' is from regular means and build up in a regular fashion, the answer is that not obvious.

Maybe you think 120k now is very easy, wait till 10 years later. The value even smaller, why not put the money on bank and pay it slowly?

here is a quick answer: see this online flat rate calculator http://loanstreet.com.my/calculator/flat-t...rest-calculator

Put in 2.5% and any number of years you like... the effective rate is more than 4%.

Flat rate: This is how the interest is calculated in car and personal loans.

Effective rate: This is how the interest is calculated in fixed deposit and housing loans.

Get it? The rates are NOT the same. To compare them, first, you need to convert the flat rate to effective rate.

My friend. You are forgetting the time value of money. You pay rmX every month. Not RM112500 at the end.

Put it another way, rmX every month in FD at 4%p.a. for 5 yrs does not yield rm112.5k

Suggested reading: http://loanstreet.com.my/learning-centre/i...e-flat-interest

This post has been edited by METALRAGE: Jul 27 2015, 12:19 AM

when you see so many disagree with you, you should be smart enuff to know you are wrong. Supersound eavesdropping there?

but the way, you retorted "..i have found that business sense is rarer than you would expect...............i have found that common sense is rarer than you would expect.......", you sounded like u are very clever.

Of course there are many reasons why people who are cash rich, still take car loan.

But that was not the answer people are looking for when they come ask whether they should keep own cash
and take car loan that seems cheap , appears lower than FD rate!
They want us to assure them yes, they can make some money out of that car loan.

To them the answer should be a resounding NO.
If they can make money out of it, they wouldn't be asking that Q here in the first place.
just see what @sootienann thinks.

1 year don't know how many times the same question crop up in this forum. I also lazy to explain liao

By all means genius, nobody stop you to become a fool

If you count like this, then it is financial ignorance already. No offence.

Banks won't loan out money at a interest rate lower than FD rate.
If so, banks are making a losing business already.
Banks are not "stupid" to do this,

Please read what is EIR for a 2.5% car loan.

Unless the money you retain now (loan instead pay in cash) can generate something more than the loan interest, the value become smaller or not issue is irrelevant actually, as putting in bank won't win against the loan interest, except for the purpose of cashflow then it is another story.

May be I should pinned this explanation, as this question has been popped up again and again.
Seems like many still do not understand what is flat interest rate of a term loan.

Flat interest term loan typically car loan, interest already counted before hand for the total tenure.
A 3% car loan interest :

Remember you won't able to win against Banks by taking loan to put in FD.
FD interest rate is the cost of bank funding, if banks do not impose loan interest higher than FD, then they are doing charity work already.

if you ask me i will buy cash...but i will choose the right car..maybe car price around 50-80k..easy ma no need to worry anything about hutang...because if you decide to make hutang the total price of the car will be more expensive..rugi

If I have 120k then put the money in fd earning 3.5% while taking loan and paying for the car maybe cost 100k while the interest for car only 2% more worth it right? I earn extra 1.5% after deduct loan interest

I mean don't take out the 120k but pay the loan from income.

This post has been edited by ic no 851025071234: Jul 27 2015, 09:14 AM

pls read post# 133

That's why. Have to do research and own diligence properly first. I am sure your salary is enough to cover the loan payment right. Malaysia property always appreciate if the location & future development is correct. Just rent it out at sightly below market rate and I am sure there will be takers.

Ya I read the post then I understand the bank earn higher interest in terms of % based on the later balance due to lower amount and flat interest.

But if calculate based on total ringgit value it earn higher by just put bank. I do a calculation on loan street with flat interest 100k 2.5% for 5 yrs end up need to pay rm112500 total.

If fd compound interest same scenario but interest rate 3.5% I will end up having rm118768.

My scenario is based on not touching the fd money and I pay the loan based on extra income 1k a month or whatever the loan requires. Like that better right?

looks like all of u don't understand the hypothetical scenario. I have 100k right now, this moment, immediately, standing by idling in my account. lets just assume this 100k fell down from the sky into my lap.

if i take a 100k hire purchase loan at 2.5% interest. after 5 years i would have repaid total 112500.

if i instead put the 100k in FD at 4% per annum, after 5 years i would have 120000 , assuming:
a) I don't reinvest the interest every time it is paid out.
B) I don't touch the FD principal . e.g. monthly outflow for car loan will be paid by monthly inflow from salary.


you yourself don't even know how the calculation is derived.

don't think that I am paying X amount into FD every month. I will be putting the entire principal of 100k upfront into FD ok.

looks like lowyat.net is not short of people who cant do their own simple calculation and rely only on theory.

looks like lowyat.net is not short of who cant do their own simple calculation and rely only on theory.

see above


see above

This post has been edited by sootienann: Jul 27 2015, 10:41 AM

You have 100k FD now.
But you don't have 100K at year 2, year 3 already as you need to draw down your FD to pay your month installment.

So the FD interest of 20k for 5 years is wrong.

The one doesn't understand is you, not others.

assuming need to pay RM 112500 / 60mths (5yrs) = RM1875 per month
if this RM1875 are not used to pay the bank loan but are used to put into the bank a/c that earns 3.5%pa
in the end of 5 years you get...RM124 800

which are more than the RM100k+ int you deposited into the FD (RM118768) and more than your total loan amount (RM112500)
so do you still think that it is still a "gain" to take a RM100k car loan and pay the monthly installment with money from the other source of income and keep the existing RM 100k available money in FD to earn interest?

I used a calculator online
http://www.bankrate.com/calculators/saving...lator.aspx?MSA=

This post has been edited by T231H: Jul 27 2015, 10:28 AM


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why would I draw down my FD principal to pay my car monthly installment ? both are independent . I have other sources of funds to pay for the car installment.

This post has been edited by sootienann: Jul 27 2015, 10:12 AM

Assuming 100k FD at 4%.
Interest that can generate for you with car monthly repayment 1875.

(as compared to pay off in cash)

1st year
second month, you left with 98,125 that can generate 4%
third month, left 96,250

Second year, you are left with
77,500 that can generate 4%.

In the final 5th year, the interest will be so little as you are left with 10K in the FD.

The further it goes, the less interest can be generated.
So you do not generate 4K per year from the 100K.
In fact, the final 5th, the interest can be generated is less than Rm400.

Ok th nx bro. Great tip.