Saturday, October 4, 2008

Car Loan vs House Loan interest rate

This may be a little bit too technical for some but definitely useful for those who really care about their money and has something to do with or going to have car loan.

In Malaysia, vehicle loan rate is calculated flat, forward sum to the future.  For example,
You borrow RM 100,000 vehicle loan for 7 years at 3%.  Your total repayment for the whole period is 100,000 x ( 1 +  7 x 0.03 ) = RM 121,000.  There are 84 months in 7 years, so every month you have to pay 121,000 / 8 = RM 1,440
Don't get confuse with this 3% car loan rate with the Fix Deposit rate, or BLR or House Loan interest rate.  Because the calculation method is different, they are not comparable to each other.

In short, in order to compare your car loan interest rate to your house loan rate, you need to convert the car loan rate into a compound rate.

Table below is a reference for such conversion.

For example, the highlighted in yelow says that.  If your Car Loan interest rate is 3% and you are taking a 3 years loan, then it is equivalent to 5.68% house loan interest rate.

My rule of thumb on this topic is :  Simply multiply car loan rate by 1.9 to convert them into a house loan interest rate.

Have fun continue to be puzzled and confused by above table ..  have a great weekend !!

The above table and figures are one of the TOP SECRET in personal finance that even most 
Bankers don't have, not to mention your financial planner, insurance or mutual fund agent.  But if they do, please let me know ...

12 comments:

** OUT OF TRACK 思 想 出 軌 ** said...

Excellent! he said.
We are pretty amazed for knowing this from your post - is it possible to have personal loan instead?
To own a car essential for living in Msia... :((

Michael Tsen said...

Any Loan with ZERO interest is a good offer !! :)

Personal Loan, even with 0% interest, usually comes with "Personal Interest" also. Its not a 'rate', just personal 'interest'. As long as you are aware of what the lender's interest is and you do not mind paying that, thats fine ... hee hee, a bit out of scope in this blog but you can dig more from my personal blog, michaelTsen.com

** OUT OF TRACK 思 想 出 軌 ** said...

Perhaps I asked from our pov in HK. What I was trying to ask is, whether Malaysians have other choices than lending money from bank for their car loans which would give them a better/lower interest rate? From my poor knowledge about MY - thats pretty much about it, we dont have much choice back there therefore most Malaysian are being swallowed in any ways the bankers want it to be... whereas as compare in HK here, we have lots of personal loans companies and 'send' money to your doorway, all you need to do is to sign and get as much as you like...

Michael Tsen said...

o .... got ... here also have many Personal Loan facilities, some are founded by billionaires from China/Thailand, some are license Ah Long, some from Pasar also got ...

Anonymous said...

U DID NOT COUNT IN THE LEGAL FEES THAT OCCURS...

Michael Tsen said...

legal or illegal, fee factor is left out to allow a 'clean' comparison between car and house loan alone.

Hari said...

This is an exapmle i.e http://ownerautowiz.com/ for above information. This May help in getting More Information

carloancar said...

Great to know the -- in depth from this blog.This will really help for my forward steps to be taken.
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Delhan Fero said...

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Arjun Singh Rathore said...

nice one sir
you really confuse the reader about the car loan and house loan but i understand but you want to say.

Khairul Asyraf Zakaria said...

Laaaa. is is because loan house calculate using ammortaization formula and car loan based on fixed rate....haiyoooo you got MBA kaH??????????????? want to be my student?

Hitesh Chavan said...

Thank you for sharing such great information. It is informative, For More Details Visit: Housing Loan Interest