hello, i wanna ask you guys, let say if i purchased a car with 9 years installment, after 1.5 years do you think it's worth to pay all in one short to settle the balance of my car loan? let say the balance is RM35k


thanks

a car loan isn't exactly the same as a house loan

for a car, you use hire-purchase

for house, it's sales-purchase

in a hire purchase, you'll agree to an amount, including the interest x number of repayment years, so it won't make any difference if you pay all in one big shot or if you follow the schedule

for sales purchase, it's different. interest is calculated daily, based on the remaining principal amount. and there's usually a clause which states a sum of penalty if the loan is settled in less than the minimum retention period (usually a few k's if you settle in less than 2 - 3 years)

anyhow, correct me if i am wrong. those are best to my knowledge

@lucifah,
If ur not going to be saving much interest, Y not continue the instalments? Would it not be better to haf greater cash flow? However, if U are the type [like me!] who doesn't like owing people/bankers $ and U haf the $ then by all means go ahead.

this is what im thinking now, i rather put the Rm35k to some kind of investment? maybe...

I am also nearly in the same situation except my loan is 3 years and the amount borrowed is less. I have paid at least a year and have thought about paying the rest by next month because I have some spare cash.

The most important thing is to talk to your bank that you borrowed the loan from. Like my case, they told me that if i choose to pay now I no need to pay for further interest. However, you took a 9 years loan and I am pretty sure that the interest is pretty high and there may be many TOC.

In short just talk to your bank. They are the boss.

if u pay whole shot of ur remaining loan (let say still left 3 yrs), u can request for waiver of the interest charged on that 3 years with certain penalty.

but of course if u have house loan, it is better used up to pay for house loan.

correct me if wrong

@hirota,
U prob can check with the bank if they can give u some discount if U pay off early since U still haf at least another 7.5 years to go. If they aren't gonna give u more discounts, U should consider putting the $ into some investments?

Invest your money, rather than paying back the loan. Better ROI

how much is the loan interest rate?
is is more than FD?

@ttwangsa,
If U intend to put the $ into FD, U should just pay off the car cause ur probably not going to earn much from that RM35k.

I think TS should also ask if he's got savings put aside for emergency purposes? It would be good if he can keep aside at least 6 months of expenses.

This post has been edited by tinkerbel: Jun 19 2008, 09:21 AM

IMHO .. I would still remain the amount of years for the loan to let it run .. and either make use of the RM35K for investment or savings purpose .. instead of using it to pay off the entire car loan.
Debts with the bank is always there .. trying to turn it to something good and harmless in our life should do the trick.

U could also use the $ to purchase a home?

this exactly what im thinking right now, but my gf suggested why dont settle the car loan first, so that it will reduce the monthly installment or monthly commitment instead of paying 2 loans both hse and car at the same time...

@hirota,
U won't get more than RMX loans from the bank so U shouldn't worry about the cash flow issue. However, if U are intending to borrow more $ from the bank to finance the house, they may take into consideration the RM35k loan U haf and minus that out hence for U to get that approved, U might haf to clear the existing RM35k loan.

Er.. do i make any sense?!

You do get a rebate and it could be calculated by a standard special formula.

The banks earned more interests on earlier years then ( more weight on it ) than later years. Diff from housing loan which is on reducing balance method.

Sorry i lost the formula. Should get back to you once I have it. Or else contact your banker to confirm.

This post has been edited by SKY 1809: Jun 19 2008, 11:08 AM

You will definately get a rebate from bank. example if you borrow $35k nine year for 4% interest, that mean each year interest is $1400, if you early settlement for 3 year, the bank will give u rebate $4200.
However, if you have housing loan, advice to dump your money to settle the housing loan.

@keonglck79,
Calculation of car loan is different from house loan hence that calculation of urs isn't quite accurate.

Are you sure ?

I do not think banks are so generous to get you back RM 4,200. Correct me if I am wrong.

This post has been edited by SKY 1809: Jun 19 2008, 11:36 AM

@SKY 1809,
Yeah.. they probably make U pay for early settlement *grins*

Hmm .. not a bad suggestion. But have to do some homework before really making use of the money $$ for the downpayment.
But that would also depends on the bank for the amount of loan to be assigned to you.