Hello everyone, need some advices on which plan to go for is better for me. I have a hire purchase loan with 3.87% interest balance with RM30k and 3years more to go.

Assuming I have extra funds now, would it be wise to dump everything on hire purchase and get 2.7k discount or better to dump in house loan with 4.2%?

Just want to know which is more worth it to deal with my extra funds? FD rate is so low these days at 3% only.

You pay off the hire purchase save 2.7k? AFAIK, usually if you settle car loan early they charge you penalty. Double check with bank.

As for house loan, if yours is flexible loan then it will be very good to put in extra money there. It will shorten the loan period for the house indirectly reducing the interest.

Do some calculations and put it into the one that save more.

only settle hire purchase earlier if you have :- an upcoming big purchase where you have to free up your monthly commitment if not, it's always better to put in housing loan to save on interest.

Housing loan would be better...

Again, the amount of the extra funds is critical too..if the extra fund is not that much, and some ppl have poor control of it, then its better to settle the car....

If not, juz put it in the housing loan...tat would help with the credit rating, if need be...

What would bank charge you for settling your loan early?

Penalty?

Are you sure?

if your house loan is fully flexi, i would dump into housing loan, at least you have the flexibility.

even if it's not full flexi, i still would not settle the car loan. put the money somewhere else.

Semi flexi consider as flexi loan also right? Just that the procedure of withdrawing the money a bit hassel

yeah. abit of a hassle, need to go to branch if i'm not mistaken. even when you deposit for extra, you need to notify them i think.

Car loan is a sunk cost as the interest is already included up front. House loan is calculated based on how much principle you have left.

Go for the house loan and just pay the car loan as it is. After all the car is a depreciating asset.

House loan can still overdraft ( if your loan has it ) so can take cash out if you hit a jam.

Car loans usually has a time frame, for example if you taken a 7 year loan and you wanna settle it in 4 years, there will be a penalty. If you settle at 5 or 6 years, they will return the interest to you for the remaining years. Check with bank.

My bike loan from Bank Muamalat has this. Took a 5 year loan and if I choose to settle within 3 years, got penalty.

I don't think if you settle your car loan earlier you'll really benefit because the interest for the car loan is already fixed and locked in.

As for housing loan, dumping in would shorter the period/ lower interest.

I'd recommend dumping into housing loan in this case.

at times like this ensuring liquidity is very important.

Car and house loan is already set and it's there for you to pay sooner or later. You dont get much compared to paying early and having flexibility in terms of liquidity.

Of course some housing loan allow you to take back out money for user in case of emergency. But it's a tedious process.

To be safe, keep it for rainy day.. and it's indeed been raining everyday now...

We have become poorer, live with it
Monday, 27 Apr 2020
By WONG CHUN WAI

https://www.thestar.com.my/news/nation/2020...er-live-with-it
We have no choice but to live much simpler lives from now because we have all become poorer.

Car loan is fixed interest rate
Mortgage is not
I’ll go for mortgage

Wow.. It seems like dumping my extra funds into house loan is a better choice. Thanks guys

I’ll dump into car loan only if I can fully settle the car loan, thus increasing my cash flow.

Example you owe bank 40k car loan, you are paying Rm1,500 per month. Let’s say you have 40k cash in hand and you want to buy another house. If you dump your 40k cash into your home loan, it wouldn’t do anything to your cash flow. You are still paying both House and car per month.

However if you decide to fully settle your loan, you can release Rm1,500 worth of cash flow and with that you can use to to buy your second property.

Else if you do not have any plans, just pay down your housing loan.

Just make sure u have sufficient for emergency fund

I was thinking to just dump my extra fund into housing loan since the interest rate is higher than hire purchase loan.

I know hire purchase loan interest is fixed. But if I were to pay up now then I will get rebate of about 2.7k.. Loan balance 30k.. So I'm a bit confuse if its worth it to dump the extra fund into car loan after doing the math

Yeap definitely.

Ermm bro no, hire loan is simple interest. If you convert it to reducing interest the rate will be higher than housing loan.

Anyway you can’t change that already, the interest rate is already fixed when you buy the car. The 2.7k rebate that you will get is far less than what you’ll get if you invested that money elsewhere and pay your car loan as usual.

Unless you wanna free up your cash flow, there’s no reason to pay up your car loan. The interest is already incurred, just go with it.