This 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:
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
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
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
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.