QUOTE(Ronald K. @ May 7 2018, 01:33 PM)
Actually that’s not the right way to calculate the annual net return for ASB loan (by solely taking dividend minus interest), which in this case is 2% (7%-5%).
When you pay for the instalment monthly, not all actually goes to the interest (can refer to the financial calc). Part of it is the principal amount which you’ll get back when you cancel the loan, which in this case is the surrender value - so the net return is actually more than that, way higher than FD as well with flexibility and minimal risk.
Will share the exact calculation later after work.
Firstly, there are 2 returns involved in ASB loan, one is dividend & bonus, while the other is surrender value.
As promised, below is the calculation of net return for the 1st year:
- Assuming a 200k loan was taken in Jan last year without takaful @ 5% interest while dividend for the year is 7%.
- Monthly repayment for a 30-yr tenure is RM1,074 so for the first year he/she has paid RM12,888 (1074x12).
- As for the dividend that they received in early Jan this year, it was 7% of 200k which is RM14,000.
- Hence difference of RM1,112 (14000-12888) between dividend and 1st yr instalment is one of the returns that they received at the end of the first year.
- In addition, there's also surrender value (principal amt) involved which is accumulated along the loan tenure - in this case loan balance after 1 yr is about RM197,049 therefore surrender value at the end of first year was 200k minus 197,049 amounting to RM2,951.
- So, to deduce the net return for 1st yr, we take total net return (1112+2951) over 1st yr instalment (12888) which is roughly 31.5%.
Of course, there's risk involved whereby interest and dividend are not fixed - however ASB loan offers flexibility in which it can be terminated anytime without any penalty charges so pretty much no worries on that.
Hopefully this helps, thanks
This post has been edited by Ronald K.: May 7 2018, 05:30 PM