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Personal Financial Management V3, It's all about managing your $$$
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superhero_123
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 Apr 22 2016, 11:59 AM
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Getting Started
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My situation:
Own a car, thinking to sell of and will have around 25k on hand. Am planning to put the 25k into current house loan and buy a new car with 25k loan.
Is this feasible? My simple thinking is since house loan interest is higher (>4%) and car loan interest (<4%), I should save some money on interest. And also the house loan reduction of 25k will save me more interest in the long run since interest is calculated daily.
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superhero_123
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Apr 22 2016, 12:39 PM
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Getting Started
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QUOTE(Showtime747 @ Apr 22 2016, 12:14 PM) Bro, your interest rate concept is wrong. House loan is reducing balance, while car loan is straight line. So, car loan interest is roughly 2 time the quoted rate. If the bank say is 3.5%, then the effective interest is around 7%. House loan is always cheaper than car loan, personal loan and the like Your plan is not a good plan. 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? |
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superhero_123
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Apr 22 2016, 01:06 PM
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Getting Started
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QUOTE(supersound @ Apr 22 2016, 12:49 PM) 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. |
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