Jun 20 2018, 01:39 PM
QUOTE(weichong @ Jun 20 2018, 11:53 AM)
Car loan uses something called Flat Interest Rate, you can convert it to Effective Interest Rate(something similar to FD) using some online calculator . https://loanstreet.com.my/calculator/flat-t...rest-calculator
3% flat rate for 7 years is about 5.57% effective interest rate.
In summary,
Scenario 1
if you take RM50,000 car loan for 7 years and dont touch the FD, you will have RM 65,796.59 in FD after 7 years compounding.
Scenario 2
if you pay with FD money and put the monthly installment you have to pay every month into FD, you will have RM 62,989.57 in FD after 7 years.
How you get RM62989.57 in scenario 2?? I got RM69895.20 through https://financialmentor.com/calculator/comp...rest-calculator3% flat rate for 7 years is about 5.57% effective interest rate.
In summary,
Scenario 1
if you take RM50,000 car loan for 7 years and dont touch the FD, you will have RM 65,796.59 in FD after 7 years compounding.
Scenario 2
if you pay with FD money and put the monthly installment you have to pay every month into FD, you will have RM 62,989.57 in FD after 7 years.
You already calculated the loan as 5.57 effective interest rate, which means the loan cost more than the earnings through FD..
Therefore of course it is better to pay the car using cash
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