Thanks for response.

I understand that car loan is a straight loan, so it is just calculated 1 time based on loan. In example, 25k loan for 3.5% for 5 year is equivalent to 4375 (25k x 0.035 x 5).

House loan if reduced by 25k, let say interest 4.6%, equivalent to 1150 (25k x 0.046) for first year.

This is my understanding and if over long run, wouldn't it be better? Maybe after 4-5 year, it would be the same as car loan interest?

What type of new car that can get by rm25k loan?
Selling the old junk to get cash then jump to another hole just to get a new scrap metal
If you have true rm25k of cash, indeed it will help to reduce principle a bit, but if you are getting another to loan just to see have rm25k, it is a dumb way to begin with.

25K is just an estimation. Am looking to change to a small car from current car.

What I wanted to know is by doing that, is it a right choice financially.

Nope, as said in the first statement.

Compare like to like :

Car loan :

25k, 3.5%, 5 years
Total repayable = (25,000+4,375)=29,375

House loan :

25k, 4.6%, 5 years
Monthly installment = 467.21 x 60 = 28,032.79

So house loan is cheaper than car loan, despite what the interest suggest. Because for house loan, your interest is calculated on reduced principal every month. So, interest is more at the beginning, while less at the end. On the other hand, car loan interest is calculated fixed at 25k for the whole 60 months

Why flat rate and effective rate is different.

1. Interest on the flat rate is calculated upfront on the whole loan amount for the whole duration of the loan.
In other words, after each monthly installment were paid, the loan is gradually reduced, which means that we don't really owe the bank the whole loan amount for the whole duration. Yet interest was already calculated on the whole amount for the entire duration (or tenure).

2. Interest on the effective rate is calculated on the remaining balance of the loan. After each installment paid, loan is gradually reduced, and interest is calculated each time (monthly) when the next installment is due. In other words, interest is "effective" on the outstanding balance.

3. Which is better? Well, to compare them, there are online calculators to convert the flat rate to effective rate.

4. Is it misleading for banks to use flat rate? No, as the effective rate is also made known in the documents that people signed; just that most do not read the fine details.

5. Can BNM do anything on flat rate loans? They can restrict and limit the tenure of these loans to max of 7 years or less. Any tenure more than the allowable max number of years, the loans should be an effective rate loan with monthly statements stating the outstanding balance and the monthly interest charged each month.

6. Anything else BNM can do? They can require financial institutions to issue, to all borrowers of flat rate loans, a quarterly statement stating the final amount to be paid if the borrower wishes to clear and terminate the loan early.

(I guess the last point would be an eye opener... and maybe this shock theraphy would help in reducing household debt. But nothing would happen... since bankers need to make easy money and car makers need to push and sell cars, and consumers need their loans to live lavishly.. need to keep the wheels of economy spinning... even when spinning out of control into drains.)

if i were to make personal loan, which bank loan is the best for me?

my salary : rm50k per annum
require loan : rm10k for 2-3years

This is my friend case, and I am proposing him to take EPF money to settle personal loan via his current semi-flexi house loan.

Personal Loan amount: RM15,000
Personal Loan Interest rate: 11.0%
House Loan Interest rate: 4.4%
EPF Interest rate%: 6.4%

Suggesting him to withdraw money from EPF Account 2, and take the money from his semi-flexi house loan account to settle personal loan.

Is it possible? Once EPF made the payment to my friend's house loan account, there is no difference than own money deposited to house loan account right?

This post has been edited by engtat: May 3 2016, 07:31 PM

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This post has been edited by sniperz: Jul 26 2016, 09:39 AM

Not really. If it is first time withdrawal, it is possible to get the amount issued in a cheque (I think, not very sure) to your friend's name. In that case he can do whatever he wished with the money.
If the amount is paid to the bank by EPF, it would be considered a partial settlement of the homeloan and the amount is separate from the normal flexi advanced payment. So the EPF withdrawal amount cannot be taken out from the flexi account. This would be the case for withdrawals other than first time withdrawal.

Account 1 investment in approved unit trust cannot be taken out as cash. Even if you sell the unit trust the money goes back to EPF account 1

Would be more than happy to hear how you can get around the rules though

-EDITED-

This post has been edited by sniperz: Jul 26 2016, 09:34 AM

hope you can check with your up line to see if your method is workable or not before posting....

-EDITED-

This post has been edited by sniperz: Jul 26 2016, 09:36 AM

just that what forummer Dasecret mentioned is the true practice currently...

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This post has been edited by sniperz: Jul 26 2016, 09:40 AM

sigh... please do not state or ask such Q.
as a PubMut agent or any UTC, U should know better.

this is WHY some are saying 3 legged-cat kungfu want to show-off or cari prospects.
Add value la, not confusion

note - in nowhere did the forumer state his bro/friend age

This post has been edited by wongmunkeong: May 3 2016, 11:08 PM

How about refinance the house? use the extra cash from the refinancing to clear the personal loan, as the rate is 11%. How many years your friend has been paying the hse loan so far? and what is the market value of the house?

While hse loan is at 4.4% (is much more lower than the personal loan)...
btw, how old is your friend? if he still young, can consider refinance.

the number of years you can borrow is up to 35 years or if your friend reach 70 yr old, whichever reach first. (correct me if i'm wrong).

personally, i will not go for the epf withdrawal as it still gives about 6% (assuming that your friend still working, and contributing to epf... the total will gradually grow).
i think in this case, refinance the house is a better option.

while, can use the epf for investment, that will be your retirement (Unless your friend has a better achievement in terms of ROI that is more than the epf 6% annually, else you can consider that.

While your friend get to clear the personal loan, he also can use the epf to invest. however, please be caution, that investment comes with risk. so it depends on your friend risk appetite, and the discipline for it.
if you go for high risk investment via epf, you may get high return, but you also may risk high losses. basically just do your due diligence.

My friend is not good in investment, so based on his personality, I will not suggest something complicated.

15K of amount seems like not worth to refinance when there are other charges, and his repayment just started less than 3 years ago, I did not see any room to refinance.

EPF Acc 1 to UT involves sales charge, I hope my suggestion can minimize his impact in retirement with EPF, try not to touch other acc.

Yes, it would be first time application for withdrawal, I read the EPF website that there is chance for cheque payment if direct debit with financial institue has failed, but not sure whether can opt in for cheque in the beginning.

If withdrawal from house loan acc after direct debit is possible, guess this is another option. Just wondering anyone done this before.

Friend age @ 38.

This post has been edited by engtat: May 4 2016, 01:06 AM

1. Do U understand what a forum is?
a. A forum is where people share & talk/think things out - especially Finance, Business & Investment thread.
b. There is no "personal talk" or stepping on toes if one were to interject in any posts, if one provides evidence/reasoning
c. People here (this thread) talk numbers, proof, evidence, etc. - well, should anyway BUT U as a UTC are saying item (2.)

2. U, as a UTC, should know better than to state that people can use EPF A/C1 --> Unit Trust --> Cash out unless that person is no longer contributing to EPF.

3. Sending me a personal PM, "geeking" me?
seriously?
+ reporting my post which i stated (2.) and telling U why some folks think what they think of U because a UTC itself don't know the law?
U & Supersound deserve each other.




This post has been edited by wongmunkeong: May 4 2016, 12:34 PM

He sent the same warning to me when I posted that he's fishing for customer. More or less the same content. Gave him some nice advice but apparently he thinks it as provoking him.

Well maybe sifu wong should show hand as a DIY and make him jelly?