ASB - Take a loan to Invest?
Written by Irwan on July 4, 2006 – 1:23 amThis is my analysis of investing using loan. As some of you might know, investing on loan is quite popular among Malaysians. Even some banks make a fully describing brochures to attract people. One of the main confusions is the monthly pay. I noticed some banks use lower monthly payment but here, I’m going to use standard BLR + 0.4% as the interest rate which is 6.9%. Some calculations are done with the help of online calculator. There are a lot of methods to invest using loan. I will just analyse the ones that I think the best.
Update: Too tired of numbers? Use my simplify ASB calculator instead.
If you would like to share your ASB investment plan, here is the place
The data that I used in this calculation is as follow:
Interest Rate:6.9%
Dividend Rate:7%
Lending Terms: 10 years
Loan Method 1:Dividend will be used to buy more ASB shares
Monthly Payment = $587 (using online calculator)
Conventional Method 1: Invest $587 monthly for 10 years in ASB
Verdict:
Loan Method :Total Investment at the end = $98357 ( 39.63%)
Conventional Method:Total Investment at the end = $103888 ( 47.48%)
Total Cost: $587 x 120 = $70440
Loan Method 2 : Dividend will be used to pay monthly loan payment.
Monthly loan payment minus Monthtly Dividen = 587 - 291.66 =$295.33
VS. Conventional Method 2 : Invest $587 monthly for 12 months, and $295.33 for 108 months
Verdict:
Loan Method :Total Investment at the end = 50,000 ( 28.40%)
Conventional Method:Total Investment at the end = 58884 (51.22%)
Total Cost: ($587 x 12) + (295.33 x 108) =38939.64
Click For to see How I get the Numbers: Calculation Or click the Thumbnail Below
Please comment if you see any discrepancy. Thanks
Addendum:
BLR (Base Lending Rate) - A minimum interest rate set by Bank Negara. It will change over time and not fixed.
Dividend - Distribution of earnings to shareholder. ASB’s dividend is around 7-8% each year.
Posted in ASB |
July 4th, 2006 at 2:38 am
Besok2 dah kaya jangan lupa member
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July 4th, 2006 at 2:41 am
haha.. mesti member2 aku lagi kaye dr aku…
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August 15th, 2006 at 7:00 pm
Salam to irwan.biz,
Just visiting your website, and would like to give feedbacks.
I don’t like the idea to make personal loan, then invest in ASB. One of the main reason is you’ll have difficulty to maintain monthly payment to the financial instutions/bankers, and believe me, no bank programs that offered by them will make them lose.
If we have a good discipline, sure we will achieve better results with our own hard-earned money.
cheers
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August 15th, 2006 at 10:09 pm
salam zam4ever,
nice to see you here,
I agree with you. Discipline is the most valuable tool that we can nurture in ourselves.
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September 13th, 2006 at 12:23 am
Salam,
Consistent monthly payment deposited into ASB account will outdone any loan. Entering any ASB-Scheme loan only mean working for bank. Btw, if you are going to make monthly payment to pay for your ASB loan, why not put the money into your savings then?!
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September 15th, 2006 at 2:23 pm
Hi,
I personally think that ASB is a good scheme. I don’t think Bank Negara would released such scheme if its bring no good to the public. However based on my calculation I found that the more you borrow (more than 50k) the higher the return you will get compare to personal saving.
Committing to a monthly saving is not an easy task. I dont think I can make such committment if not because of the loan agreement. In a way its discipline me.
I also think that an investor need to be clear the objective of his investment. There are many products out there in the market that can help you reach your end meets. Putting all eggs in one basket is certainly not a good thing. Always remember the concept of OPM and High Risk High Return!!
Cheers
There are various investment products out there in the market.
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September 25th, 2006 at 10:27 am
My 2cents…
I Done both.. take up loan (Just to get capital) save up atleast 2k - 3k peryear…
I cant save 500+ per month, so my best bet is capital first
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September 25th, 2006 at 4:49 pm
goodluck in ur investmeny Nuzz! i would love to hear your experience from time to time.
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October 14th, 2006 at 12:14 am
You have to remember that interest on the loan is based on BLR. If Bank Negara decides to raise the BLR to curb inflation, you might lose out. Its actually very simple really: as long as ASB dividends > interest on loan you’ll come out on top.
But then there are also several catches. If you take a loan from Maybank, they’ll charge you extra for insurance. Basically if anything happens to you (i.e. you kick the bucket) then the insurance will cover the loan and your relatives wont have to worry about the debt. I don’t know if you can opt out of the insurance scheme, but it does add to the cost of the loan.
Also, I could never figure out how Maybank calculated the interest on the loan. The loan I took is suppose to be fixed 4.5% interest for the first year, BLR-0.5% the second year and BLR+0.4% for the subsequent years. But the amount of interest Maybank charged me was never consistent and never tallied up to my calculations (e.g. one month it was lower, the next slightly higher, then lower again - shouldn’t the interest charged get lower after every passing month because of the payments I made?). I couldn’t get a decent answer from the people at the Maybank branch so I canceled the loan.
Furthermore, as Irwan stated, the interest on ASB is around 7%-8% (higher if you have invested longer because of the bonus – read the prospectus if you don’t know what I’m talking about). But the interest on the loan is around 6-7%. IMHO I don’t think that paltry 1% is worth the trouble of taking the loan. And remember, the interest is based on BLR - it can go down, but it can go up too.
Finally, there’s something called opportunity cost that most people just don’t consider. Think of it this way - the money that you have to use to pay the loan can’t be used for something else. What if your car breaks down, or you need to fix the leaking roof, or your child gets sick, or you want to buy some new clothes? The money you use to pay for the loan can’t be used for these other things, and you loose a lot of flexibility because you have to service the loan each month. And what if you want to take another loan to buy a house for your family or a new car? The banks won’t look upon you favorably if you have too many loans.
Well, at the end of the day I suppose it’s what people want to do with their money. To each his own, but this is my opinion on the matter.
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October 16th, 2006 at 1:40 pm
That correct, I’m on Maybank loan now.. its around 8% per annum (+/-) and the ASB bonus is around that figure also.
The reason i’m taking loan is that I dont have much in my ASB, before the loan, I got only 1K+ .
So, I take up 20K loan, pay 150 / month. (For the capital)
plus, I bank in around 100 or 200/month in ASB + my year end bonus.
First year, my account after the bonus from ASB I got 27K (good bonus).
2nd year, (this year) before the company bonus I already got 30K & hopefully can add some after my company bonus.
I want to reach 50K as early as 2008 and now seems that i’t still within reach..
If i’m saving 200/month + 3000 or so from my bonuses for sure I cant get 50K by that time.
So.. That is my 2 cents..
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October 17th, 2006 at 1:15 am
Hi Nuzz,
Congratulation on your investment. Not many people realized the importance of investing.
erm.. quick question, how many years your loan will be? 150 permonth for 20K loan on 8% seems to take a lot of time.
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October 17th, 2006 at 8:35 am
20 years :p
I’m not gonna bother about the 20K.. Its just for capital
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October 29th, 2006 at 11:01 pm
hye nuzz,
did u take maybank ASB loan or Maybank personal loan?
I dont find any information about personal loan on maybank2u.com.my,
perhaps i need to go to the maybank office?
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November 3rd, 2006 at 3:54 pm
Dear all..,
I`m still blur about the decision that i should take? Now..i`m taking maybank conventional loan ASB. I paid for rm79/month for 20 years.. My age now is 24 years old & still studying.
Did i make a good moved or wrong?
Can you all give me an rough idea about the loan. Otherwise, i will cancelled the loan.
Please help me..
Regard;
Penemu Lama
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November 3rd, 2006 at 4:20 pm
Hi Penemu Lama,
it’s normal to be confused in this loan idea. To be honest, I’m confused too. One thing that confused me the most is the monthly payment that borrowers pay to bank. It way low than I think it should. I have no experience in making up a loan, so I can’t argue much about it.
in your case Penemu, if you invest normally RM79 per month you will have RM40,643 after 20 years
and in Nuzz case, RM150 per month will fruit RM77,170 after 20 years.
If you think loan investing will give you more, then continue with it.
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November 6th, 2006 at 4:33 pm
Dear Irwan,
Glad to hear your comment…
I like a lot about financial and economic matter but then i`m in other course speciality. Anyway..i`m really appreaciate the comment that you have give to me.
When we talk about money…everybody seems to see us like “materialistic” but i don`t care about it. It is our goal.
Back to our dicussion…that`s mean i should get RM40,643 if i save the money in ASB without using ASB loan?
Or do you mean that..i`m having “rugi besar” if i`m taking the Maybank ASB Loan.
Can you give a feed back about this matter…
Regard;
Penemu Lama
“Growing healthy tree need all factor surrounding them”
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November 6th, 2006 at 6:11 pm
Penemu Lama,
do you want to keep the ASB as it is or you would like to top-up with your extra money.
like my case, the margin of Bank interest and ASB bonus is so small and sometime you would have to pay the bank more that you recieve.
If you want to just pay (invest) only 79 / month the loan would just be wasting your money. you’ll get even more by saving your own money monthly, but if you are thinking of using the ASB loan as a capital and top-up more with your own extra money it would be worth it.
Keep in mind, Bank loan is based on the capital and ASB bonuses is based on you account balance. the more you have in the account the better.
Like Irwan stated, 150/month for 20 years can go up to 77,170 but if I manage to add my ASB account to be 30K by the third year & 50K by the fifth year, I would reach 70K easily even without adding more extra money.
I hope that make you clearer on this matter.
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November 6th, 2006 at 10:13 pm
penemu lama,
after making recalculation, it turns out nuzz’s plan (20k loan capital plus self-invest of RM150 permonth + RM3000 peryear) is comparable with the conventional method. By the end of 20 years (by the time the loan finished), Nuzz actually will earn about RM 1000 more from conventional method ( RM302500 vs RM301700). i will upload the amortization table later.
I will confirm all of this later, i got test today…haha
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November 6th, 2006 at 10:47 pm
please comment on my new ASB calculator here
http://www.irwan.biz/editable-asb-calculator/
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November 10th, 2006 at 4:48 pm
Give a tumb up!!
Thank you for your inovation asb-calculator.
If we talk about money…the money never enough. The more money you have..the less you will said.
Regard;
Penemu Lama
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November 13th, 2006 at 12:01 am
ada kelemahan in your “Loan Method 1″ calculation.
assuming you are paying 587p.m. to service the loan, it is relevant 4 u 2 deduct the same amount every month from the ASB balance.
e.g. if the opening balance is 50k, then the lowest amount for the first month that you need to use as part of the ASB annual dividend calculation is 50k-587=49413, not 50k. subsequently every month will be less and less by 587 until the loan balance in zero.
in other words, the profit ratio for “Loan Method 1″ should be much2 less than 39.63%
try wiki “opportunity cost” to understand more about relevant costs.
do tell me what you guys think
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November 13th, 2006 at 5:50 am
I’m assuming that for both “loan method 1″ and “conventional method 1″ investors will have to use their own money which is RM587 for each month. So for the Loan Method 1, the money that used to pay the loan comes from the inventor.
That way, we can compare the performance of each method by using the same capital which is RM587 each month, for both Loan and Conventional Method.
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November 21st, 2006 at 12:09 pm
Dear Irwan,
I found that your explaination is good but unfortunately I’m not quite understand since its not related with my study field (i’m engineering student), so I need your guide. Let say I want to invest RM300 per month for 10 years. How much shall I get back? Plz answer to my email kerullz@yahoo.com . Others also welcome to give feedback and sugestion
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December 28th, 2006 at 10:05 am
Hai Ijat,
You said that can be free from debt…let share here lah…tell us what kind of method did you apply? very interested to see you reply back
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December 28th, 2006 at 10:34 am
agree with hafiz, it will be useful to everyone. sharing is caring :).
@khairul, you got my email
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December 29th, 2006 at 8:40 am
Hai Ijat,
Then, can you please email me the explanation…thankx
gtti_141@yahoo.co.uk
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December 29th, 2006 at 9:03 am
and maybe after that Hafiz would explain to everyone here. :p
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December 30th, 2006 at 12:43 am
lol.. you got my email my friend
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January 4th, 2007 at 11:22 am
actually,it is more on u want yur money to work for u. make a hundred thousand loan.u will get the dividen that still cannot backup the monthly payment.but,if u just add25thousand to asb,you just have to wait for 20 years,then you will get back 130000.i alredy calculated.
but if u have real properties investment, better invest in that bisnes la… buy land,separate lots and sell. hahaha
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January 4th, 2007 at 11:36 am
real properties is a good investment. i mean it. i need to start to build my foundation in real prop.
btw, 25,000 at 7% per year yields around RM 96.7k after 20 years
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January 9th, 2007 at 6:24 pm
RHB had ASB loan at BLR - 0.49% I think.
My question, if you have extra money, would you pay down loan to save interest and shorten the tenure of loan or pay ASB?
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January 9th, 2007 at 7:49 pm
This is my opinion. (I called it opinion because I haven’t done any relevant calculation)
By taking loan, you are actually buying the ‘time value of money’ by paying for the interest. And by using that money to invest (in ASB in this case), you sell back the ‘time value of money’ for better return. It’s a kind of buy-low-sell-high kind of business. So, paying back the bank to shorten the loan (or to save interest) is comparable to returning goods back to suppliers instead of selling to customers.
It’s interesting to note that sometimes, investing is a very counter-intuitive field.
So I suggest you to put your extra money into ASB instead of shorten your loan. As I said earlier, I came to this without any hard proof.
And by the way, most loan have different BLR for each year, just make sure that low BLR is not just for the first year only.
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January 11th, 2007 at 11:11 am
penin paler arr…. adeh! can sumbody explain ol this in malay. i pn invest gak…. huhuhuh
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January 11th, 2007 at 11:17 am
penin pale ar bab nk kira2 ni…
can sumbody xplain in malay? huhuhu… dak ni biol cket in english. tq!
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January 11th, 2007 at 11:18 am
huhu.. bahagian mane yg penin cik maria?
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January 11th, 2007 at 11:32 am
klo nak kire, xyah peninkan pale pun cik maria, gune spreadsheet excel ni
http://www.irwan.biz/editable-asb-calculator/
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January 14th, 2007 at 11:57 pm
salam sejahtera..
berkenaan dgn asb loan+saving sendiri tuh dah ok..
cuma..dlm buku asb..nak tnya..kalau nak buat pengeluaran..boleh ke tak?duit yg mana kite boleh keluar?capital@simpanan sendiri@kedua2 nye?berkenaan syarat2 dari bank pula mcm mana?dibenarkan buat pengeluaran ke sebelum tamat tempoh loan?
jawapan plz..
emailkan kpd synchozen@gmail.com
tq..
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January 15th, 2007 at 11:34 am
Saya nak tanya macamana kalau saya nak buat ‘fullsettlement’ untuk conventional loan saya? Adakah saya kena isi apa2 borang di Maybank atau boleh terus bank-in kan saja ke bank? Macamana dgn Jumlah wang yang saya pinjam tu adakah akan terus dimasukkan ke dalam akaun saya atau diberi dalam bentuk sijil?
Jawapan plz emailkan kepada solehah75@yahoo.com
TQ.
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January 15th, 2007 at 3:39 pm
mengenai pinjaman, x byk yg blh saya tolong sebab takde pengalaman, maybe pengunjung lain blh menghulurkan sebarang pertolongan.
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January 15th, 2007 at 4:57 pm
Sijil adalah milik nama kita, tapi bank ada surat kuasa untuk jual.. sijil nie lebih kurang bankers bond laa.. leh transferable.. nak buat antaran kawen pon boleeehhhh…
So.. kalau nak buat full settlement, bank selalu tak galakan.. dia akan suruh jual sijil (amik masa dalam 2 minggu - sebulan) pastu dia akan potong jumlah belen loan dari situ…
pasal duit plak.. sijil tu takleh kluar.. sebab memang takan ada dalam buku pon.. buku just tunjuk cash ja.. masa kira dividen tahunan tetiba ja ada jumlah simpanan termasuk sijil…
boleh kluar cuma cash (Bonus / duit simpanan sendiri)..
selamat menyimpan.. bagus untuk masa depan, yang penting jangan plak enjoy sakan bila dapat bonus tiap tahun.
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January 16th, 2007 at 9:41 am
i think i know what is ijat try to post about..if i’m not mistaken, it’s about OD facility combine with asb method..in my opinion , the method is really great..u just can get that method by seeing financial consultant..n it is costly also..
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January 16th, 2007 at 9:44 am
hi ijat, if u hev that method..i want it too..email me please..snbg_81@yahoo.com
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January 18th, 2007 at 1:44 pm
Hi Ijat,
Care to email me the explaination of your method as well? Thanks!
aimanx_k@yahoo.com
Rgds
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January 25th, 2007 at 6:51 pm
Assalamualaikum.
Topik melabur dalam ASB melalui pinjaman ni menarik jugak. Cuma nak clearkan lagi jawapan nuzz di atas. Apabila kita buat pinjaman ASB dengan mana2 bank, bank akan membeli sijil ASB atas nama kita berdasarkan jumlah yang dipinjam, contoh RM20k. Kemudian, bank akan inform kepada PNB yang sijil berkenaan dicagarkan kepada bank dan PNB akan blocked sijil berkenaan supaya ia tidak boleh dijual semula. Blocking itu akan dilepaskan apabila menerima arahan dari bank, biasanya dalam 2 keadaan. 1. Peminjam buat full settlement 2. Peminjam tak boleh bayar loannya, bank akan jual sijil berkenaan. Kemudian, alamat peminjam seperti yang ada di dalam buku ASB anda akan ditukar kepada alamat bank bagi memastikan sijil berkenaan dipos ke alamat bank. Sesudah sijil itu selamat diterima oleh pihak bank, ia akan dijadikan sekuriti atas pinjaman (seperti geran tanah & rumah anda). Selepas itu, alamat anda akan ditukarkan semula ke alamat sebenar anda.
Menyentuh tentang baik buruk buat loan ini, terpulang kepada masing2. Bagaimanapun, kalau anda tanyakan kepada mana2 ejen saham amanah, pelaburan melalui pinjaman adalah tidak digalakkan sama sekali. Risikonya adalah, sekiranya anda tidak mampu membayar pinjaman anda terutamanya dalam masa tahun2 awal pinjaman anda, walaupun sesudah bank menjual semula sijil anda, anda akan masih lagi terhutang dengan bank. Perlu diingat, apapun jua pinjaman yang diambil, saya boleh katakan 2 tahun pertama, anda cuma membayar faedah pinjaman dan jumlah pokok hanya akan dibayar perlahan2 pada tahun ketiga. Itu sebabnya bagi anda yang mengambil pinjaman, anda dikehendaki menandatangani PENYATA PENDEDAHAN RISIKO sebagaimana disyaratkan oleh Suruhanjaya Sekuriti. Ia adalah tanggungjawab pegawai institusi pinjaman untuk menerangkan kepada anda risiko yang perlu anda tanggung. Sekiranya anda tidak diterangkan oleh pegawai bertanggungjawab, anda berhak mengadu kepada Suruhanjaya di atas dan tindakan boleh diambil kepada institusi dan pegawai bertanggungjawab kerana kesalahan ini adalah amat serius.
Wallahualam
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January 29th, 2007 at 5:22 pm
Hi ijat, interested in your method of OD + ASB. Care to share with me ? Explanation in BM or English accepted :-)(yozx80 at gmail dot com). Quite confused already reading all post above.
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February 2nd, 2007 at 2:46 pm
penin nye pale… adeh! huhuhu…
)
i bwt loan dgn maybank? so bln2 jez byr instalment tu je n every yr dpt bonus. tp kn, u ol ader tips tak mcm mn nk gandakan kte nyer bonus tu. pas2, peratus dividen asb tiap2 bln sm ker? asb ni mcm main saham ker? (mak pn nk tahu gak
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February 2nd, 2007 at 7:26 pm
salah satu tips utk gandakan/maximumkan loan ASB ialah guna duit sendiri along with the loan. I actually don’t know why it’s so. But from my calculation and others opinions, it seems to work.
ASB ni x lah macam saham sgt, sebab saham tu ade naik turun harge. Bile harge naik, kite jual dapat untung.
Tapi ASB ni stay RM1 seunit. Stiap taun PNB akan bgtau dividend ngan bonus rate. so kite dapat untung dari dividend.
camne keuntungan dikire: http://www.irwan.biz/how-to-calculate-asb-dividend-and-bonus/
ASB Calculator:
http://www.irwan.biz/asb-calculator-v2/
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February 4th, 2007 at 5:02 pm
Dear all,
Hi there, i wanna ask about this ASB thing, say that i pinjam 100k for 10yrs, can i take kluar the balance (bonus) after say maybe 3 years? (Since I know that i cannot take the 100k only after 10yrs rite?
) Which means that can I take 20k after 3 yrs? (since lepas 3 yrs bonus ade 20++) Is this possible? Help thanks
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February 5th, 2007 at 5:20 am
i wish i could help you Mr Tswenahir but loan is beyond my knowledge.
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February 5th, 2007 at 10:04 pm
hi mr tswenahir,
watever amounts u pay to ur ASB Loan , u cant withdraw it out…until u settle all the payments. The only thing u can withdraw is ur dividend n bonus with u can see it clear in ur ASB passbook.
hope it will make u clear.
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February 5th, 2007 at 10:43 pm
Hi zamfitri,
Thanks for the info, just got check with the maybank counter, and ya as what you are saying it is true. But it is still a long way to go for me to enjoy all the dividens and bonuses sigh… Probably will take out some money after 3 years for my first home (mf gf has been chasing me up for tunang tisk tisk tisk) OMG :O thinking about all the expenses that i need to deal with for my kenduri…. and a new car for the family (My god never thought having a family will be this troublesome :))
Well, hopefully miracles happens
Cheers
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February 6th, 2007 at 10:45 am
hi guys and gals,
i have had some experience (positive!) in investing and it is my opinion that one should not take a loan to invest. You are subject to fluctuations in interest and when the economy is down, your interest rate will go up. Nuzz, I am not sure how old you are but if you remember during 1997, a lot of people who took loans for the ASN funds lost lots of money because a loan is a long time commitment and interest rates do blow out of proportion. When it settles back to normal, you are already tied up with the additional amount incurred.
I am sure many have heard of Azizi Ali - one of my heroes actually! He too advises against borrowing for investing.
One must start being disciplined to start saving and investing. ASB is a good investment tool (unfortunately I dont qualify but I have made good money on my other unit trust funds).
With ASB, you should do direct deposit every month - dont take a loan because you are losing out on the full profit that you can get.
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February 6th, 2007 at 11:16 am
Absolutely agree that the ASB loan is not recommended for investment. Some of my friends did this before, and most of them (not all) were suffer when the time is come to use money for other purposes especially emergency circumstances. In other word, you’re bind with loan contract, and freedom to use money is minimized.
-zamri-
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February 6th, 2007 at 10:03 pm
I wish you good luck tswenahir on your life. No matter how hard it is, di mana ade kemahuan di situ ade jalan. may god bless you bro. Don’t forget to invite me to your kenduri kahwin later. haha
About the investing using loan, it goes back to greater risk better profit rule. How you justify extra profit with extra risk is personal. To me, the joy of investing is the joy to know that I’m of using the extra money to generate more profit. But if I’m investing using loan, I feel bounded and forced to pay, not to invest. Thus the joy is not there. That’s why loan-invest is not my cup of tea.
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February 7th, 2007 at 10:17 am
I burned my midnight oil last night, as to prove how can ASB dividend pays instalments. Well, I found out that for a 50k ASB loan in a 20 years scheme, we have to pay a total amount of 7.5k per year, but on the other hand the dividend is just 5k assuming a 10% rate. It takes around 6-7 years to start making profit, assuming a stable interest rate of 6%-6.5%, as well as stable dividend rate of 10%. But along the way, 7.5k per year must be paid using non-dividend money for at least until the profit kicks in. The longer the dividend stays inside, the higher probability that more profit is made out of a yearly payment of 7.5k. If not, one is actually accumulating debts with the bank. I firstly thought that yeah, this is the way to go. But, according to Janet, the interest is not as stable as I am assuming it is. And as I see it, the risk can be overwhelming if I still miss something about this ASB loan system.
How high can interests be? How high it was in 1997? Can someone tell me? Janet? Irwan? =D I am also happy to exchange views through emails. People, feel free to buzz me at hafizzei@gmail.com.
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February 7th, 2007 at 1:10 pm
Hi Piji,
If I am not mistaken, these are the figures:
The base lending rates (BLR) are 9.5 per cent (June 1997) and 10.3 per cent (December 1997) and 12.1 (18 June 1998). Some loan financing went up to 17% because of this!
I had an experience a couple of years ago which helped me see the light - i had a car loan for RM100,000-00 which money I had in a FD. Since my loan was 2.5% and my FD was at 3.7%, I was very satisfied thinking I was making money.
That was when I spoke to a friend who is a financial planner and he told me how wrong I was! Because of this calculation i did - I was losing out 23,700-00 to the bank when i could have saved that money by paying off my car loan and depositing my loan instalments into small FDs every month. Well, i did the long term calculations and he was right.
i cant seem to send to ur email - here’s mine if you would like more info. janemmacaswell@hotmail.com
regards
janet
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February 7th, 2007 at 3:32 pm
Really thanks about the info janet.
Wow, I finally realized the risk of taking a loan. It is kinda unpredictable because the BLR itself is unpredictable. Paying a loan is like taking forever if I don’t properly plan and monitor it! Yeah, we definitely need to do thorough calculation. For eg, in ASB loan, the expected (again, assuming this and that) dividend looks higher than interests by 1-2%, and I was thinking like janet, paying the loan using dividend is no problem. But I was wrong, and the result is potentially disasterous.
Geez, I think even my parents don’t realize about this….
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February 7th, 2007 at 4:01 pm
Hi, this is something off-topic. Is it true, we could buy ASB units at all banks in Malaysia regardless if we want to take loan for the purpose or not? Can anyone suggest which bank is better to buy the ASB units? Should one have a savings account with the bank first?
Thanks.
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February 7th, 2007 at 6:43 pm
Hye Md,
Can’t answer your first two questions. But I can give a hint about RHB Bank if you want to know about ASB loan. If its just about normal i.e. conventional method (quoting irwan’s nomenclature hehe), post offices, Maybank, CIMB, are some if not all ASB agents that we can go to. RHB’s “pembiayaan pelaburan” has an offer now, whereby it deducts 0.49% of BLR if you want to use RHB as your platform. Not sure when it ends, though. If you visit its website, it also offers an OD service, on top of many more services. http://www.rhbbank.com.my/loans/asb_loan.shtm . And yes, you will have to open an account in RHB first. I don’t know about other banks, though, and I strongly agree that one has to check which one suits him/her better.
If you plan on using the conventional system, just visit any of the agents stated above, no charge, no fees, as ASB is not a bank, its an investment machine. Any agents will open an ASB account for you, which is not the account with any banks.
Believe me, I am not working with RHB. lol~ it’s just that I went to the bank 2-3 days back. Hope this serves you the answer.
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February 7th, 2007 at 7:53 pm
Hi Piji, thanks a lot for the info
P/s: by default, thanks to irwan for hosting this blog.
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February 7th, 2007 at 8:20 pm
honestly,the pleasure is mine.
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February 7th, 2007 at 10:17 pm
Piji, which RHB branch do u visit? haha..lol… Frankally speak, i’m workin with RHB as a Personal Banker, so whoever got any enquiry or wanna further explanation of ASB Loan or OD/ASB, feel free to ask me… i will try to give the best explanation (hopefully, not being biased..haha)…
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February 8th, 2007 at 10:32 pm
zamfitri0208@yahoo.com
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February 9th, 2007 at 4:15 pm
have u ever heard of amcash investment? it is quite the same as asb loan, can someone walk me through this, im still blurr about it..tq
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February 12th, 2007 at 8:01 pm
im not sure about it but as far as i know amcash is just another kind of mutual fund. correct me if im wrong.
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February 13th, 2007 at 12:55 pm
This is an article written by Azizi Ali regarding investing using loan money.. It’s long but worth reading.
One of the most common question I get is this: is it a good
idea to borrow money to invest in investment x (the x can be
unit trusts, ASB, properties, business, Bank Rakyat shares,
etc., etc.)?
Let me answer the question in real world terms.
Firstly, that is how folks build serious money - by using
other people’s money. This strategy is a regular occurrence
in business. Entrepreneurs borrow money from the bank to
finance their expansion. They conquer the world, repay the
loan and make tons of money. And that is always a good thing.
Now this concept of borrowing money to make more money works
a treat for businesses as the margins are wide. The interest
charged for the loan is often below 10 percent, but the
business reaps 30, 50 or even 100 percent return on their
investment.
Further, because of the wide margins, even when the returns
drop, the businesses still make loads of money.
Now you can see why this concept is made-to-order for
businesses.
However, the same does not apply when it comes to
investments such as shares or unit trusts. Often time, the
margin or spread between the interest and return is slim -
less than 3% most of the time. For example, the interest
charged is 9% but the return is only 12%.
Now if the situation remains like that - with the interest at
9% and return at 12% - things are still hunky dory. You would
do
well taking the loan and making the investment. However, what
usually happens is that the return starts to drop off. From
12%, they drop to 10% and then to 9%. (By the way, this is
what happened to the fabulous ASB.)
The way things are going, the return could very well drop
below the interest charged! And this is not an unusual
thing. When that happens, instead of making money, the
investor is now forking out money. And that, needless to
say, is not a very nice thing to happen. Not exactly the stuff
of fairy tales. (By the way again, this is what usually happens
when folks borrow money to invest in stocks.)
Now after painting the real world scenario, let me answer
the question. Yes, you should borrow money to invest - if
the spread is wide (more than 5%) and you are pretty sure
that the situation will remain status quo for the loan
period. For example, if the interest is 9%, the return
should be at least 14%. Otherwise, let others be the
test-pilot. You watch by the sidelines.
Now, I know a lot of people will jump and shake their heads.
They will reminisce of how their father, grandfather, uncle,
auntie or neighbour made tons of money by borrowing money
to invest even when the spread was ultra-thin. Of course it
can happen. People also strike the lottery but has it
happened to you?
If the spread is thin, you are taking an unnecessary risk.
While you can make a little bit of money, the chances
of you losing a lot of money are significantly higher. Once
the return starts to drop and/or the interest start to rise,
you lose both money and sleep. And that is no way to make a
fortune.
In case anyone thinks that this is a theory from the ivory
tower, I personally will not borrow to invest if the spread
is less than 5%. In fact, I will not borrow to invest in
unit trusts or shares - period. I only borrow money to
expand my business and for property investment.
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February 13th, 2007 at 1:18 pm
very nice
thanks KakTi!
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February 16th, 2007 at 10:15 am
Hi…
this maybe out of the topic but I really want to know more and detailed explanation regarding car and home loan. which bank offer the best value for it’s customer?i’ve heard about the maybank graduate banking…is it really good for a graduate who just start a career like me to make loans under these scheme?
All explanation are kindly appreciate.please email me at suzyana_e@yahoo.com
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February 19th, 2007 at 9:21 am
Hi, can someone advice me. I took loan from Maybank for 10k ASB investment & I’m paying the loan RM115 per month for 10 years. At the same time, I deposited not less than RM100 per month into the ASB account.
So, my question is am I making profit / loss after 10 years?
Pls provide calculation for it if possible.
The main reason I took it is just for the capital & testing this scheme. I do understand bank do make profit out of this but without this loan, my yearly dividend will be little. Monthly payment is not a problem to me. Please help me clarify this matter against conventional saving method.
p/s: I’m currently applying both saving method. For conventional method, I deposited not less than >RM 100 into my parents ASB & my girlfriend ASB. I hope my girlfriend don’t run away with my money
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February 19th, 2007 at 12:41 pm
Using the calculator this is what i get for your scenario:
1) loan method –> Balance after 10 years: $39,411.00
2) Conventional –> Balance after 10 years: $38,474.00
Difference =$937.00
Conclusion: You will be having more money at the end using loan method
To me, it’s like give and take, you gain more money by taking more risk. So if you think the risk is rightly justified with the profit, go for it. And as you are already in your plan, I strongly suggest that you continue with your plan as long as you don’t have any problem paying the loan payment.
And I wish you best of luck with your investment and gf lol
—————–
Data used in the calculation:
Loan Method:
Initial Investment:$ 10000
Average ASB Dividend rate:7%
RM add per month:100
RM add per year:0
Average ASB Bonus rate: 2%
Conventional Method:
Initial Investment:$ 0
Average ASB Dividend rate:7%
RM add per month:$215
RM add per year:0
Average ASB Bonus rate: 2%
[Reply]
mez83 reply on June 3, 2008:
maknanya…better wat loan ASB dari conventional
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February 19th, 2007 at 2:57 pm
Great! Thanks a lot. The difference is very small. Is it possible for me to increase the gap?
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February 19th, 2007 at 3:32 pm
Strangely Myr, I tried to increase saving rate for both loan and conventional but the gap is still the same - $937.00. so the conclusion is, increasing the amount of money that you put won’t give loan method extra edge over the conventional.so you might want to try other method.
However, Ijat (commentor above) might help you out. He advised to use overdraft facility with the ASB certificate. I haven’t venture into this method much so I’m not really sure about the outcome. But with my own simple reasoning, the method should widen the gap like you wanted but i don’t know how much.
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February 19th, 2007 at 4:43 pm
OD facility… Never heard of this before. I hope someone care to provide details about this facility. I don’t like to contact those people from the bank coz they always show a positive side of an investment.
It seems very difficult to make money from money if we don’t have large capital. KakTi is right anyway. Well, higher return means we have to go for the high risk investment such as starting up business. But what I am applying right now is good enough, at least I gain something.
I’ve calculated, my investment will yield >60% profit ratio from initial investment after 10 years. To achieve >70% profit ratio, I need to save up RM115 per month. I’ll upload this Excel file tomorrow.
Irwan, I found a calculator at http://www.asbpierre.com/Tools/tools.htm. Could you extract the formula of that tool? BLR, how it is calculated? It is yearly or monthly? Based on the JavaScript, I found that:
BLR aka form.interest.value = (i/100)/12
Monthly Payment = (form.principal.value * pow * i) / (pow - 1) where pow = pow * (1 + i)
Pow does look like FV = PV(1+i)
The source of the JavaScript is as follow:
// JavaScript.
function checkNumber(input, min, max, msg) {
msg = msg + ” field has invalid data: ” + input.value;
var str = input.value;
for (var i = 0; i 1.0) {
i = i / 100.0;
form.interest.value = i; }
i /= 12;
var pow = 1;
for (var j = 0; j
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February 19th, 2007 at 4:44 pm
Continue from above (this comment section is limited ehh!)
j
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February 19th, 2007 at 4:46 pm
ugh! Sorry. The code seem to be missing. I don’t know what went wrong. To obtain the code, just go to http://www.asbpierre.com/Tools/tools.htm & view the code. It should begin at line 54.
Sorry again.
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February 19th, 2007 at 4:55 pm
BLR or base lending rate is set by bank negara. Usually bankers will state the loan rate as something like BLR+0.5%. BLR will change each year according to our economy.
The calculator seems like a normal calculator for loan. it’s calculated the interest on monthly based.
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February 19th, 2007 at 7:29 pm
Actually, BLR is set by individuals bank and endorsed by BNM. There are few factors in fixing the BLR. Among those are the intervention rate (mandatory deposit scheme) imposed by BNM to all banks, KLIBOR (Kuala Lumpur Inter Bank Offer Rate) - a short term financing among banks and off course, the government economic policies. Remember when BLR reached its peak at 12.1% in 1998 because the government wanted to curb the outflow of RM abroad.
The BLR is not necessarily changed every year. BLR is monitored by BNM and individual banks and they will review it from time to time based on the current economic scenarios. Wallahualam.
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February 20th, 2007 at 10:06 am
Hi to all,
Following Irwan’s reply to the very first question by Myr, I’d like to confirm that the profit margin (stable BLR and dividend for 10 years) between conventional and loan methods is around the value stated, i.e. RM937 more or less. I personally think that it is quite low compared to the duration of 10 years, compared to the risks that one has to take for e.g. possibly changing BLR. One of the personal bankers told me that the amount we have to pay monthly won’t increase if we have to pay more to cover an increased interest rate, but the duration of payment will stretch. So 115 will have to stay, but for how long, I can’t tell. I wonder if Myr’s methodology of adding his own money can yield more on top of basic loan (RM10k), but according to Irwan, the profit is still around the same. I’ll take his words for now hehe. But yeah, the duration of loan payment is the major risk of getting a loan to invest in ASB. BLR is undefined, but 115 is definite. If only every person was born with a capital in hand, instead of a plain silver spoon hehe.
I cannot confirm on this following claim, but OD is like credit card facility without fees (perhaps). You use OD account to pay your monthly maintenance, and top it up at the end of the month. Similar to credit limit, you can’t withdraw more than the amount stated in the sijil premium. The idea of using OD facility is great because it makes your loan money as if it can be used (because you can’t withdraw the money inside ASB until you settle your loan repayment). However, one will still have to abide to the first rule of thumb, don’t spend more than what is earned. I rest my case.
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February 20th, 2007 at 10:29 am
If it’s like CC facility without fees, OD is a very interesting addition to loan method. Imagine, ones could use the OD for reinvest into ASB, or if it restricted, use it for daily consumption while the paycheck be invested into ASB. It’s like beli satu percuma satu. But this is on assumption that it’s free without fee, which I think it’s directly opposite of what banks do.
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February 20th, 2007 at 12:52 pm
Overdraft facility (OD) is granted by the bank usually to business people. The major purpose of OD is to act as a back-up capital when need arises. OD facility requires collateral in term of cash (to open up a FD and surrender the cert to bank as collateral), property (land, house etc) or guarantee, usually by Credit Guarantee Corporation (CGC). Very seldom the bank will give away a clean OD (without collateral/security) especially for personal consumption.
Three major issues u need to consider for this kind of revolving credit :
1. The pricing is based on BLR++. If the BLR goes up, u need to pay the interest more. I could say the interest charged on OD is higher than term loan such as housing & ASB loan.
2. The bank could recall the facility at any point of time if they dissatisfy with the conduct of the account. If it happens, the borrower needs to repay the utilised portion + interest in lump sum. This facility is also subject to yearly review.
3. If u pledge a FD say RM20k as security, your investment comes with additional cost i.e. monthly servicing of interest. If u have that amount of money, why don’t u put it direct in ASB and enjoy the dividend without having to pay any single cents from your own pocket.
As per Federation of Malaysian Unit Trust Managers’ (FMUTM) advise, u need to consult the banker before taking decision to invest through financing. I wonder if the banker can give such a balance advises as they also need to achieve their sales target……
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February 20th, 2007 at 2:17 pm
Our country experienced recession on 1997 (if I’m not mistaken), is there any chances it going to occur again this year 2007?
Thanks for the info Piji. What other risks associated with ASB loan?
Since my method and conventional method yield almost same result, I’ll stick to this for the moment. Conventional method also being applied at the same time where monthly contributions are being made into other acc.
I’ve heard Bank Rakyat dividen is 15% p.a. Is this true?
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February 20th, 2007 at 2:32 pm
The 1997 recession was caused by currency manipulator George Soros. But now our currency is better protected and it is valued using basket system which stability depends on other regional currencies. In my opinion, it is unlikely that our economy to be doomed by speculative effort like it was in 1997. If there would be a recession, the cause would be different.
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February 21st, 2007 at 9:13 am
Mýr Fantasy,
Bank Rakyat did give dividend at 15% rate but only to its members. Right now application for new membership is on a waiting list. If some member sell their shares only then you can bought it. I think it is a very loooong waiting list.
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February 21st, 2007 at 5:09 pm
Hi Mýr Fantasy,KakTi. Is the 15% dividen from bank rakyat savings account. and thanks Ahem for the OD explanation
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February 22nd, 2007 at 9:08 am
Md,
The savings account at Bank Rakyat just give around 1 -2% a year. Bank Rakyat start as a cooperation, so they have members who invest in the bank. So these members are getting the benefit (15% dividend) from their investment right now. Others that are giving the same good returns to their members are FELDA and Army Cooperation.
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February 22nd, 2007 at 10:17 am
I see :). Thanks KakTi
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February 22nd, 2007 at 10:18 am
I see. KakTi, thanks for the info.
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February 22nd, 2007 at 1:13 pm
Salam…saya adalah sorang made ASB loan..baru setahun lah….tapi in the same time saya akan pastikan rm100 akan dilaburkan dalam ASB /month…sebelum buat ASB loan saya dah ader aroun 3k…rasernyer tindakan buat loan bijak atau tidak…
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February 22nd, 2007 at 1:14 pm
mr ijat saya pun berminat dengan idea sedar…leh send ke emel teman ayie_98@hotmail.com
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February 22nd, 2007 at 2:18 pm
mr ayie, sy perlukan lebih info utk buat penilaian:
brape payment utk loan sbulan?
loan tu utk brape tahun?
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February 23rd, 2007 at 3:36 am
As for me the bank wins in all sort of ways. The BLR not gonna decrease in 5 years time and the ASB dividend is definitely not gonna increase as well. This is modern robbery by the commercial bank, can’t blame them, they just in business to make more money from your money. Try diversify your self in other investment as well. Don’t put all your eggs in one bucket.
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February 23rd, 2007 at 12:02 pm
20 thn 20000. 157 / month.
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February 23rd, 2007 at 3:17 pm
ayie:
1) loan method –> Balance after 20 years: $155,726.08
2) Conventional –> Balance after 20 years: $149,149.98
Difference = $6,576.10
————————–
Data:
loan>
Initial Investment:20000
Average ASB Dividend rate:7%
RM add per month:100
RM add per year:0
Average ASB Bonus rate:2%
conventional:
Initial Investment:0
Average ASB Dividend rate:7%
RM add per month:257
RM add per year:0
Average ASB Bonus rate:2%
[Reply]
February 26th, 2007 at 3:51 pm
thank you…it looks nice right..but to make it real…it is too loong……..uuuwa uuwa………………..
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February 26th, 2007 at 4:37 pm
$155,726.08 ooo . If I start saving $257 per month, I should be able to obtain that in 20 years (age 45).
How to make the first million?
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February 26th, 2007 at 4:49 pm
Myr Fantasy,
You should not use the loan method. Save using your own money in unit trust as it could give higher return especially now. Then you should use the investment to buy landed properties for rental income and sell when the price is right.
With the loan method you cannot take it out when the opportunities for great investment come.
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March 5th, 2007 at 10:24 am
Speaking of unit trust, what is this exactly? Few agents approached me but still I’m not satisfied with their answers. What are the risks associated with this?
My invest on landed properties? What is the industry average ROI? Is it easy to liquidate?
**For years, I’ve been buying gold (jewelery) from those desperately need money. Helping people at the same time making profit.
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March 5th, 2007 at 10:48 am
Unit Trust are exposed to these risk:
1) Markets Risks -Since unit trusts invest in marketable securities, they are of course, exposed to market movements. Diversification will help reduce the risk but it will not eliminate risk entirely. The prices of units go up and down, dividends may or may not be paid, and you may realise a gain or loss when you sell your units.
2) Particular stock risk - major fluctuations of a particular stock invested by the fund may affect the NAV and thus impact (adversely or favourably) on the prices of the units. Impact can be minimised by portfolio diversification by fund managers.
3) Liquidity Risk - If a UT fund has large portfolio of securities that are less liquid or difficult to sell, the securities may be sold at a discount, hence affecting the value of UT fund. Risk is minimised thru the process of stock selection on portfolio diversification by fund managers.
4) Interest rate risk for bond fund - price of bond fund move in the opposite direction of interest rate.
5) Risk of manager of the fund defaulting or poor management.
6) Country risk - overseas investment may be affected by changes in politic and economic conditions of invested country.
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March 7th, 2007 at 2:45 pm
I just signed an agreement with rhb bank for asb loans. I have took 20k for 10yrs and RM225 monthly.
I dont know whether its worth or not. Just abit worry.
Im interested in the first way when the banker mentioned about i just have to pay for 1 year only…then the rest of the year will cover from the bonus.
If im not satisfy with this, who should i call to cancel it? can anyone advice me? from the rhb or asb…
[Reply]
March 7th, 2007 at 8:07 pm
hi lynn, how are you doing?
I have made some calculation for you. the notion of pay-one-year-and-you-are-done is totally misleading. This is the dividend+bonus for RM20K at 7% peryear:
year-1 $1,443.33
year-2 $1,590.83
year-3 $1,752.09
year-4 $1,928.44
year-5 $2,121.32
year-6 $2,332.29
year-7 $2,563.08
year-8 $2,815.58
so you need to pay at least eight years to have RM2700(RM225 x 12) per year to make the loan pay for itself.
Here is the conclusion of my analysis:
Total Money in ASB after 10 years= $36,778.11 ( 7.0% peryear)
Total Money in ASB after 20 years= $75,384.23 (12.5% peryear)
For equivalent conventional method:
Total Money in ASB after 10 years= $37,458.48 73.4% 7.3%
Total Money in ASB after 20 years= $84,240.09 290.0% 14.5%
you can download the analysis file here.
http://www.irwan.biz/asb/lynn.xls
this analysis is subject to my unintended mistakes. and legally, this is not a financial advice.
I’m not sure about the person who you should call but if I were you I would call RHB instead of ASB.
[Reply]
March 8th, 2007 at 7:43 am
Lynn, what the banker told you was true but it is not applicable now days. In between 1990-1995 (can’t remember), my mom took 100k loan for her ASB. As for year 1, she paid the installment but on the 2nd year, the loan was paid by itself. At that time, dividend was high & this make it possible. Now, dividend is barely 7% + BLR is almost the same figure.
[Reply]
March 9th, 2007 at 10:40 am
Lynn, what the banker told u was a serious misconduct. Firstly, the banker seemed to GUARANTEE u that ASB will pay out dividend. In reality, ASB has every right to pay out dividend on incidental basis (may or may not pay).
Secondly, if the dividend paid by ASB is less than your 1 year instalment will result in your acoount turn NON-PERFORMING LOAN because u didn’t top up the difference portion. The bank will liquidate your certificate and used the amount to cover back the loan amount. In most cases, the amount recovered was insufficient to cover the amount owed to the bank due to interest charges. And that’s the beginning of your never ending bad experience such as blacklisted etc.
If u dissatisfy with the banker, u could send your correspondence to either RHB’s top management, FMUTM or Securities Commission.
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March 9th, 2007 at 6:15 pm
Hello everybody!!! Wow the replies seems to be never ending… yes I am totally with agree with Ahmy, the first main reason of us investing in asb is because we wanna to have a better return compared with FD or SA. Though their job as a sales advisor is to close as many deal as possible, he/she should let you reap more interest! Need no fear, go to the bank look for him and ask him everything that you not satisfied! If he/she cannot do as what u might do like cancelling call up the head and explain to him/her. Do not end up sleepless and regret just because of this…
My 2 kupang
[Reply]
March 10th, 2007 at 7:26 pm
I’ve got two unit trusts which are ASB and ASW2020. We know ASB will pay it dividen on January and ASW2020 on September. Has anybody out there has try to transfer all the money in your ASW2020 to ASB once you got ur ASW2020 dividen on september? And then wait for ASB paid it dividen on January..?
email me the answer peyoy81@streamyx.com
[Reply]
March 10th, 2007 at 8:29 pm
ASB Loan IS a help for us to grab. Most of us dont have the dicipline and strong will to save for our future, instead we half-blindly and brave enough to borrow our future and consume it now. Back to ASB loan scheme; the only question is how much we could spare our income for saving. RM 100 or RM 50 p.m. is just fine although RM 1000 is better. Let me tell you pals, I contribute only RM 20 p.m. to my Koperasi, now after about 28 yrs I have accumulated more than RM 10K. Well two yrs ago I increased my monthly contribution to RM 100 because I wanted my final account in the Koperasi (sadly though, its yearly dividend is about 2% for the last five years or so) on my pension day (sometime in 2009) will be about RM 15K. Imagine that! It is the power of forced saving (I mean staright deduction from our payslip).
[Reply]
March 10th, 2007 at 8:45 pm
Let me share my knowledge (self-taught) about loan calculation
I am not sure about the term bankers use, but they calculate the payback interest by either simple interest or yearly-rest, or monthly-rest, or even daily-rest. The calculation we were taught in Std Six (during my time - 1965) was on compound interset. Bunga = Pokok x Kadar x Tahun /100 (.. Sekolah Melayu da..). Example: Borrow RM 20K, interest rate 7% p.a., Tenure 10 yrs. So, the total interest = RM 20000 X 7 x 10 /100 = RM 14000. So, our monthly payment will be (RM 20000 + RM 14000)/(12 x 10) = RM 283.33. This is the way most banks use for so many short term loan now being offer and so is the car loan (Hire Purchase). NB: Hire Purchase Act allows for rebate in case we opt for early loan settlement. Go to Autoworld play their loan calculator.
[Reply]
March 10th, 2007 at 9:10 pm
What is montly-rest or yearly-rest loan calculation?
By monthly-rest it means the interest is calculated based on the balance of the loan at the end of each month. So, if it is yearly-rest the calculation is based on the balance at the end of the year. To calculate the monthly payment we need to use the maths we learned in Form Four: goemetry series & arithmatic series. Let the capital we borrow is P; the interest rate is K p.a.; the number oy yrs for payback is T. Base on the monthly-rest calculation, the montly instalment = [PxKx(1+K/1200)^(12xT)]/[1200x{(1+K/1200)^(12xT)-1}]
Note: The “^” sign means “power of”. Example: 2^4=2×2x2×2.
Most housing loans are calculated on monthly-rest.
[Reply]
March 10th, 2007 at 9:23 pm
How to calculate your ASB cummulative dividend?
Example: You borrow RM 20000 for 10 yrs. Let say the dividend is 7% p.a. and you dont do any withdrawl for the loan tenure. Assume you have that RM 20K on 1.1.2007.
On 1.1.08 you have RM(20000)x(1.07)
On 1.1.09 you have RM (20000)x(1.07)x(1.07)
On 1.1.10 you have RM (20000)x(1.07)x(1.07)x(1.07)
So simply after 10 yrs (that is on 1.1.2017) YOU HAVE RM (20000)x(1.07^10) = RM 39343.03. How much money you have paid to the lender? RM 34000.00. What THAT means? You make a fortune worth RM 5343.03 and the bank RM 14000. You also force yourself to save RM 20000. Cheers!
[Reply]
March 12th, 2007 at 5:19 pm
produk pelaburan terbaru dari ambank group…amcash guarantee 21…pulangan atau dividen sebanyak 15% setahun (lebih tinggi daripada simpanan biasa di bank, ASB, unit trust dan fixed deposit)…tiada risiko…jaminan kewangan diberi percuma (sebanyak 10 kali jumlah simpanan diberi percuma jika berlaku kematian, lumpuh atau 36 jenis penyakit kritikal - dijamin!!!)…tempoh pelaburan 3, 10 dan 21 tahun…produk terhad!! fisrt come first serve!! jika berminat hubungi saya di talian 0166858296 untuk temujanji - kamal….sekian terima kasih…
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March 15th, 2007 at 6:21 am
Mr Rakmal, thanks for the detailed explanation of loan investing. I have verified that final balance of RM39343.03 is correct.
Return of RM5343 + RM20000 for 10 years is small compare to what you put in there monthly.
Conventionally, with monthly investment of RM283.33, the balance in your account will be RM48,756 after 10 years.
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March 15th, 2007 at 3:28 pm
thank you so much irwan and ahmy for your respond.
Well, by 25th march’ 07 will be my 1st payment of this asb loan.
I dont really clear what is the advantages and disadvantages of this loan, but i hope something not bad in the future.I cant say no more since i have signed everything and feel bad if to cancel it…
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March 17th, 2007 at 9:34 am
I think you’ve beaten the horse dead with this one. I suppose for the academically inclined, all the calculations and mathematical proof is a good exercise, but for most people they just want a simple answer.
And the answer IS very simple. Most ASB loans charge 6-7% interest. ASB right now gives out about 7-9% dividend (including bonus). That means you only make out 1-2% profit every year, assuming the dividend remains constant, which in reality doesn’t.
Businesses take loans so that they can grow their company 30%, 50% or even 100% anually. Compared to the interest that they have to pay, the rewards are a lot greater. Why should you take a loan to only reap a measly 1-2%?
No my friends! ASB loans are a SCAM by the banks. Why do I say this? Because the banks take no risk whatsoever (coz if you don’t pay up the loan, they just sell off your ASB certificate and get their money back) and banks get 6-7% profit on the interest you pay. Its free money to the bank. You take ALL the risk. What if the stock market crashes and ASB cannot afford to pay dividend? Most people think that ASB dividends are guaranteed. I say, YOU NEED TO GO READ THE PROSPECTUS CAREFULLY!!
And don’t give me that crap about not being able to save. If you say you don’t have discipline, then I say you are a weak person and you don’t deserve to be financially successful in life.
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March 18th, 2007 at 1:11 am
Nice writing Pep, you should be a my PR bro…lol
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March 18th, 2007 at 8:57 am
Thumbs up to Pep.
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March 18th, 2007 at 9:41 am
Of course, this is a RISK, no RISK, no GAIN, but of course make sure one able to pay back the loan and not from the ASB itself or else that will be far dangerous. Does that mean that I’ve been cheated? Absolutely not, everybody needs to make money so as the banks. If SHIT turns up, well we did took our risk didn’t we?
Just My advice –>
Go for RM100k loan and above and pay the loan directly not by the dividend and ASAP! Trust me you will never regret it!
Guerilla Radio - Peace…
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April 17th, 2007 at 4:27 am
Greetings all…
I would like to get the opinions from u guys. I’m thinking of putting a some cash for me to use after the next 2 years. I’m thinking of getting a personal loan of RM12k with a fixed interest rates of 9.6% p.a. for a tenure of 3 years. That left me with monthly payments of RM430.
I intend to dump all that RM12k in the ASB with additional monthly investment of RM100 into the account. Using the ASB calculator provided by Irwan, with the default rates, by the end of the 2nd year the total from that account would be RM16.4k!
I figured out two things here:
* A monthly saving of RM530 would left me with only RM12720
* The total personal loan plus the interest is RM15456
I think this is a good deal as I wish to use the money after 2 years, but can u guys give comments on this?
Thanks in advance.
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April 17th, 2007 at 4:52 am
Hi deathrow… I really like to receive question from my readers.
If I got you straight, this is what you meant:
1. You borrow 12k for 3 years under RM430 payment permonth for 3 years.
2. Then you put 12k into asb plus RM100 permonth which fruits 16.4K at the end of 2nd year.
3. You then compare the same amount of money, RM430+RM100 using normal saving method which ends up with RM12720.(miscalculation here, it should be RM13699, considering 7% return for asb)
one thing u forget is, after you get RM16.4k at the end of year-2, you still have to pay RM430 for 12 months to finish the loan payment.
But with normal method, you only pay RM530×24=12720 to get RM13699. The different here is that RM13699 is all yours, you don’t have to pay for any other payment for the 3rd year.
As you said, you need to use money after 2 years, if you used loan method, you have to pay RM430×12 after you got RM16.4k.
While using normal saving method, you get only RM13699 but you don’t need to pay anything after that.
I hope i have answered your question.
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April 18th, 2007 at 1:42 pm
deathrow,
That is very bad deal. Don’t! don’t! do the loan. As Irwan say invest all your RM 530 savings and you will get the fruit of your preseverance all to your self.
If you want higher return why don’t you invest in the Public Asia Dividend Fund managed by P.Mutual that are offering 1% free unit until 23 April 2007. It riskier than ASB but with P.Mutual you will not go wrong!
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April 23rd, 2007 at 6:46 pm
aloo everybody,
Glad to hear all the tips and ideas. I`m a student.
Apart to graduate and i want also success in financial planning. Can anybody guide me in asb loan?
Every semester we are receiving scholarship…please guide me into ASB loan method.
For this moment, i`m taking ASB loan Maybank for rm10,000..every month payment is rm79.00..for 10 years.
Did i make a good move?
Regard;
Penemu ruai
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April 24th, 2007 at 12:13 pm
yeap.. you are on a good track as long as you are comfortable paying that monthly payment. at RM79 month, i think it’s not a burden to you, even as a student.
at the end of year-10, you’ll have RM21 500 in your asb.
If you invest RM79 permonth, you’ll only have RM14 100 at the end of year-10. Your loan seems as a better deal to me.
You might want to make sure that you’ll only pay RM79 for the whole 10 years (except for BLR changes). Because some bank offer cheap first year payment and charge extra for next years.
Irwan.biz
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April 24th, 2007 at 1:39 pm
penemu ruai,
From calculation you are paying RM79×12month x10yrs, it come to only RM9,480. How come you are paying less the loan amount and it seem that Maybank is not taking any profit from you.
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April 24th, 2007 at 1:49 pm
that’s what i thought… maybe maybank give him special rate for the first year and another rate for later year.
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April 24th, 2007 at 2:13 pm
Salam.
i also take a loan from maybank.just like nuzz RM 20k for 20 yrs.i still study and i have made calculation before make a loan. from my calculation, even the total amount that a need to pay are almost double than my loan(RM39000++) but in return, if the amount lend and bonus did not taken out, within 20 years the total investment will be RM 76000++.however, i plan to shorten the period after i graduated.berbaloi la invest dalam ASB:-)
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April 24th, 2007 at 2:23 pm
Salam
one more thing to remind u all, if u want to take personal loan, then u will involve in riba. i have learn how to overcome this problem.actually not to overcome, but just to avoid riba.just like me, the total loan i taken RM 20000,however during the akad to take the loan(at least ur niat),u must assume that u laon for total amount that u need to pay.like me,every month need to pay RM157.so, in 20 years i need to pay 157×12x20=RM37680. then u need to niat to take loan on RM 37680, not on RM 20000.that all i know.if wrong plizz correct it.my ustaz told me..
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April 24th, 2007 at 2:30 pm
Hi Himura,
i suggest you not to shorten the period, because the essential thing when you take a loan is that you buy the time value of money by getting the money early. Then you pay for that time value of money to the bank in term of interest.
If you shorten the period of the loan, u actually sell the time value of money back to the bank, without getting any profit in exchange. In short, when you make loan to invest, use the loan to the fullest, don’t shorten it. this is more crucial as asb rate is higher than the loan interest rate. Thus it’s better for you to put the extra money as additional investment in asb.
I totally agree with you that investment is totally berbaloi, in anyway that you invest it. (as long as it’s legitimate way) haha
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April 24th, 2007 at 2:34 pm
to penemu ruai,
actually u not pay for RM79 per month.that 79 permonth amount is only u use ur bonus from investment to repay ur loan.its means,every year u taken out ur bonus and just leave ur principal in ur account. if u use this method, and the end of 10 years, the total balance in ur account only 10k.that 79 is only the the topup top up to pay ur loan.like me, if i use this method, just need to pay RM 40.33 per month.its lower than u becoz my loan is for 20 years.
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April 24th, 2007 at 2:47 pm
salam
ok, i also realize that i will not get any benefit if i shorten the period.however, i has make calculation on this. if i can pay up all my loan within shorter period,eg 5/10 years, maybe i can reduce to pay interest.what do u think?if compared to my condition under loan for 20 years, it will give much more benefit. the prob is,i dont know what amount if i shorten my loan period.if i know, i can calculate for cost and benefit that i will get.
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April 24th, 2007 at 5:18 pm
To everybody,
I`m really sorry..the amount i paid is rm79, period 20 years..
sorry for the wrong info..
I have a question, what do you think if i`m taking personal loan at age 25..at least rm10,000..i want to use it as my business..
regard;
penemu ruai
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April 26th, 2007 at 11:05 am
saya nak wat loan.tp xtau bank mana yg blh saya wat.basic gaji saya 850 tp ada elaun 250.blm masuk ot lagi…biasanya berapa lama proses wat loan?
sbb saya perlukan duit tu bulan 10.saya nak wat loanRM5000.sy dh penat mencari bank yg leh sy wat loan.blh tolong x?????????
[Reply]
April 26th, 2007 at 11:07 am
sesape yg blh tolong saya atau ada cadangan blh email saya di shazmira58@yahoo.com
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May 2nd, 2007 at 9:01 pm
Consider the fact before you make any accusation:
1 - This is a bank loan, you do not have to take it out if you dont want to. This is just another way of making forced investment, you have to be disciplined in making monthly instalment.
2- The loan is backed by your ASB investment. The bank hold your ASB sijil and if you are late in payment, the bank will sell this sijil and you get some of your money back. In theory the bank will not lose anything, so they are more generous in approving this type of loan.
3- The return is not that great but remember, after you finished paying the loan off, the sijil is yours so for me this is good for future investment, for example for your kids or hari tua.
4- You will get full rate of the interest from the get go, ie as soon as you sign the aggrement, you can get interest from that 20000. Instead of taking this loan for example you save up the payment in ASB you will only get the interest on that payment, like 200 a month or something.
Just an example, I take out 70000 loan from BCB (or is it CIMB now) and paying about 600+ a month for the loan. I already planned to save up 600 a month for my son’s future study and whatnot. So, for me that interest of just over 4000 a year is something like a bonus to me for doing a good job at saving :). After I finish paying the loan, I will have 70000 to give to my son.
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May 6th, 2007 at 11:49 pm
I heard so much about additional bonus by ASB (apart of the normal 7%). How do you qualify to get those bonus? Shouldn’t that can be taken into consideration into your profit & loss calc?
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May 7th, 2007 at 2:46 am
the bonus is also taken into consideration. Here is more info about bonus and dividend calculation
http://www.irwan.biz/how-to-calculate-asb-dividend-and-bonus/
[Reply]
May 15th, 2007 at 7:15 pm
Hi..
I had gone shopping for ASB loan at Maybank and RHB this few days. There was a lot of confusion tho’, after i talked to both.
Right know (until end of this month), a Maybk officer at OUG, Jln Klang Lama told me that monthly repayment for the loan is fixed, because of below:
1) The promotion now is year1-2~(BLR-1.75) & subsequently (BLR-1.0). With current BLR of 6.75% , she said that they will fixed the BLR at 6.75% for this particular promotion. which means that y1~y2=5.0% and y3~=5.75%. which also means that the amount of monthly repayment stated in their brochure is fixed. I was puzzled, becos i understand differently fr other ppl. But 3 times i repeat the same question and came back wt the same answer, then hey.. who am i to challenge her?
The next day i went to the opposite RHB branch. This time it was the Branch manager herself who attend to me. When i told her abt Mbk scheme, she doesnt believe me. For one a fixed interest loan should always have higher interest in principle (like Islamic banking concept). But since RHB is offering y1-y3=(BLR-1%) and subsq y4~=(BLR-1.25) which has very small difference to Mbk!
can anybody verified as to what the Maybank officer had told me?
2) The RHB also said BLR will never go higher than ASB divident, as goverment will always try to protect bumis (which to me is true). so how can it be that we have to pay extra because of fluctuating BLR? my only explanation is that BLR can change overnight, but divident payout is only once a year, and in the period of waiting for the payout, there is oredi extra difference in the interest charge. am i right? is there any evidence BLR vs ASB divident? i have the ASB past performance, but not the BLR data for the past years. Can somebody tell me what am i missing here?
3) Fyi, for Mbk if we settle the loan earlier, we will be charge one month interest. For RHB, we will be charge 3% of total loan (not outstanding balance) if we decide to settle the loan within the first 5 yr, irregardless of how long is the period of repayment. This is only applicable for the current promotion.
so right now, i am still contemplating which one to go. To me, taking this loan is not just making personal pledge for saving, but it is also about predicting the country’s economic situation and direction.
[Reply]
May 15th, 2007 at 7:16 pm
Hi..
I had gone shopping for ASB loan at Maybank and RHB this few days. There was a lot of confusion tho’, after i talked to both.
Right know (until end of this month), a Maybk officer at OUG, Jln Klang Lama told me that monthly repayment for the loan is fixed, because of below:
1) The promotion now is year1-2~(BLR-1.75) & subsequently (BLR-1.0). With current BLR of 6.75% , she said that they will fixed the BLR at 6.75% for this particular promotion. which means that y1~y2=5.0% and y3~=5.75%. which also means that the amount of monthly repayment stated in their brochure is fixed. I was puzzled, becos i understand differently fr other ppl. But 3 times i repeat the same question and came back wt the same answer, then hey.. who am i to challenge her?
The next day i went to the opposite RHB branch. This time it was the Branch manager herself who attend to me. When i told her abt Mbk scheme, she doesnt believe me. For one a fixed interest loan should always have higher interest in principle (like Islamic banking concept). But since RHB is offering y1-y3=(BLR-1%) and subsq y4~=(BLR-1.25) which has very small difference to Mbk!
can anybody verified as to what the Maybank officer had told me?
2) The RHB also said BLR will never go higher than ASB divident, as goverment will always try to protect bumis (which to me is true). so how can it be that we have to pay extra because of fluctuating BLR? my only explanation is that BLR can change overnight, but divident payout is only once a year, and in the period of waiting for the payout, there is oredi extra difference in the interest charge. am i right? is there any evidence BLR vs ASB divident? i have the ASB past performance, but not the BLR data for the past years. Can somebody tell me what am i missing here?
3) Fyi, for Mbk if we settle the loan earlier, we will be charge one month interest. For RHB, we will be charge 3% of total loan (not outstanding balance) if we decide to settle the loan within the first 5 yr, irregardless of how long is the period of repayment. This is only applicable for the current promotion.
so right now, i am still contemplating which one to go. To me, taking this loan is not just making personal pledge for saving, but it is also about predicting the country’s economic situation and direction.
Best Regards,
Sumi
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May 16th, 2007 at 6:46 pm
sumi.. do you have email or ym id..
need to discuss with you.. about your knowlede on asb..
i also plan to make a loan for my asb investment..
if you don’t mind … can you add me… mista_blur_segaraga@yahoo.com…
perhaps we can share our opinion regarding the asb investment… thanks
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May 16th, 2007 at 10:19 pm
Sumi, this is to answer your questions.
1) True that Maybank offered such package. CIMB Bank also offering about the same packages which means the bank is subsidizing the interest rate as it is well below the BLR. However, in such circumstances, if the loan account is in default, I believe the bank will charge the higher percentage of interest compared to the normal default interest rate.
2) It’s very bad for bank officer to give such explanation to the customer. The BLR can go EXTREMELY HIGHER than ASB’s dividend rate as the factors affecting both rates are totally different. Please look back to 1998 when BLR hit the highest in history at 12.1% while ASB only paid out not more than 7% at that point of time. ASB dividend is determined by the earning from PNB’s investment in shares, properties etc. BLR is depending on KLIBOR and BNM’s policies such as the intervention rates etc.
3) The bank introduced EXIT CLAUSE in housing loan and now it’s extended to ASB loan. This is related to my answer to the first question that the bank wants to recover back the losses in subsidizing your loan.
I can comment on all those questions based on my limited knowledge and experience as a former Assistant Manager in one of the biggest local bank for 15 years. I’m now a Unit Trust Consultant…..
Sumi, it