Which is wrong?

Anybody here mind to share that 2 scenarios calculation / formula?

See fun feng answer. The car loan yield 5.57% is higher than FD.

Always use effective rate to compare, not flat rate.

Car loan/term loan use flat rate interest to quote and calculate, it is not an effective/real rate (EIR) to start with.
eg.

100K 5 years 3%.
Total interest would be 15K, means 3K each year.

The problem is not the 1st year, but later year.
After paying off for 4 years, you left with outstanding of principal balance of 20K,
But interest still 3K pa.

3K/20K = 15% <---- see where bank makes the most money from.

One is paying 15% interest rate without knowing...

EIR is the figure the average out (as first year it is really 3%) and real interest rate one is paying.

The calculation I did in my previous post, shows exactly how much interest is paid to the bank yearly.

If you wanna believe bank take interest evenly every year then be my guest.

I have done early settlement before so I’m sure it’s quite accurate.

Cheers.

To understand easier,
imagine

3% FD vs 3% P2P investment

P2P has a higher EIR, therefore bigger amount, compared to FD

Can't understand man...

Me too

Conclusion

If FD and Car Loan rate same

Use loan for the car and keep the cash inside the FD

Often if buy new car, the Loan Interest Rate is lower than FD rate. Hence, read back the sentence above.

Hence, this is the conclusion when the blind leads the blind. Always remember that banks must earn higher than they pay. Hence, car loan effective rate is higher than FD.

Do you maths and prove me wrong

+1
post# 24 has the maths for those that needs it....

else google has many too

Read the thread...read what Cherroy posted...just apply the conversion template in Loan street ....converting 3% to effective rate will get u about 5.57%? So, 5.57% is higher than FD rate .

This is actually the accurate answer. EFFECTIVE RATE is the one we should look at. Not the flat rate.

i calculated TS's 3% HP rate is equivalent to 5.64% EIR for a 5 year tenure at 50k loan amount

Many people are delusional and self absorbed. Just because they manage to create a table to prove their point means they r 100% absolutely right. They never think that they get the ingredients wrong and hence, the end product is wrong 😅

+1.

If DP can gives more than personal loan/car loan...then bank rugi liao. Bank will never ever do rugi business. If things are too good to be true, usually it's not true

This post has been edited by Duckies: Jun 22 2018, 04:17 PM

Correct la.. bank's business is cranking % and u think they are fools meh? They take your FD and loan you cheaper? Lolz...

The table shows how much interest we paid to the bank yearly.

We are paying more interest to them in the early cycle of the loan and pay lesser in the later stage. That's why if one, want to do an early settlement of the HP loan will be surprise to see there's still so much principal owing to the bank despite already paying half the loan tenure.

You are only able to earn money only if the FD is place there for the same tenure as the HP loan without uplifting it.

Simply said, the bank earn your money NOW while you have to wait 7 years later to earns yours.

This post has been edited by rapple: Jun 22 2018, 04:38 PM