@beautifulchristianone Bro just made 8 people -10 IQ.
Discussion : choosing 9 year loan despite high income??
- Thread starter schnolhamor
- Start date
beautifulchristianone
New member
@beautifulchristianone Stay this way bro. 
johnny4christjesus
New member
@schnolhamor I took the proton saga with a 3 year loan, 3% interest...
Short term pain but it's actually a financially correct choice....
Basically only pay 9% interest on the car only....
A 9 year loan, you pay less amount per month, but it's 27% interest, not worth it.
Short term pain but it's actually a financially correct choice....
Basically only pay 9% interest on the car only....
A 9 year loan, you pay less amount per month, but it's 27% interest, not worth it.
@johnny4christjesus Went with the same decision until I’m being hit with
F’s in the chat for people thinking everyone else is in the same financial position like them lol
F’s in the chat for people thinking everyone else is in the same financial position like them lol
johnny4christjesus
New member
@schnolhamor Scenario 1. No matter what, the guy can't afford a 100k car with 60k annual income, this also follows the car price < annual income rule of thumb
Scenario 2.
The EIR for 9 years loan is 6.34% (loaned 90k, 9 years, 3.5% flat interest). Hence if you're able to generate returns of >6.34% from the extra cash flow, then take the 9 years loan. Else, it's wise to go with 5 years loan
Scenario 2.
The EIR for 9 years loan is 6.34% (loaned 90k, 9 years, 3.5% flat interest). Hence if you're able to generate returns of >6.34% from the extra cash flow, then take the 9 years loan. Else, it's wise to go with 5 years loan
@rdprakash Curious - how do we calculate the EIR?
@rdprakash Awesome stuffs. Thanks for explaining!!
@schnolhamor I prefer cash flow more than paying lower total interest.
@schnolhamor I think total interest matters so definitely the lower tenure loan. If someone is ‘stretching’ their money this way they don’t have very good financial hygeine.
Unless you have a way to make more than your car loan interest (99% of the people won’t be able to beat the interest) it’s clearly not worth it to pick the longer tenure. Needing the cash flow for something else means you can’t actually afford the car imo.
Unless you have a way to make more than your car loan interest (99% of the people won’t be able to beat the interest) it’s clearly not worth it to pick the longer tenure. Needing the cash flow for something else means you can’t actually afford the car imo.
@schnolhamor Lets just use OP’s number
If you loan for 5 years and park the money in the remaining 4 years in ASM/ASB you will have about 90k at the end of 9 years assuming 5% dividen.
And for 9 years loan let’s assume we park the extra 667 into ASB/ASM and we will have about 88.2K.
If its were me I am fine with about 1.8k difference over the course of 9 years as long as I have reserve money in case of emergency.
If you loan for 5 years and park the money in the remaining 4 years in ASM/ASB you will have about 90k at the end of 9 years assuming 5% dividen.
And for 9 years loan let’s assume we park the extra 667 into ASB/ASM and we will have about 88.2K.
If its were me I am fine with about 1.8k difference over the course of 9 years as long as I have reserve money in case of emergency.
iamremnantband
New member
@schnolhamor If compared to long term investment that has projected >3.2% (keyword: loooong term, 10> years), then, maybe worth it. Investment is usually the earlier the better. So if that's what your friend is aiming for (the cash flow being, more money being able to put into investment, aside from other savings), I see why not. Another scenario I can think of is your friend may want to save for a huge downpayment (talking 20% ++++) of a mortgage.
What's important is your friend knows what they are doing and runs their calculation thoroughly that fits their goals and current lifestyle. Life has too many nuances, normally generic rule is for beginners to have a good starting point. Along the way u will find what's doable and suitable to your current living situation.
Who knows, eventually your friend will get a higher paying job and eventually can settle the loan faster (provided it's the variable rate loan).
What's important is your friend knows what they are doing and runs their calculation thoroughly that fits their goals and current lifestyle. Life has too many nuances, normally generic rule is for beginners to have a good starting point. Along the way u will find what's doable and suitable to your current living situation.
Who knows, eventually your friend will get a higher paying job and eventually can settle the loan faster (provided it's the variable rate loan).
katehunt977
New member
@schnolhamor Whacking a 9 year loan make sense when you already have the cash:
Take the loan at 3.2%, pay it every month.
Take the cash and put it in a place that yields more than 3.2%.
Over 9 years you’d made more money from the cash vs than if you just pay for the car straight. Paying loan every month also makes your credit score looks nice.
This is one of the logic used by actual “high income” people. Otherwise, standard personal finance practices applied.
Addendum: a car, like a house, should be thought of as a consumer goods rather than “asset”. Because that’s what they actually are. You buy the car to drive the car, not to park it there and hope to sell it for some profit someday.
Again, consider this a “high income” logic.
Take the loan at 3.2%, pay it every month.
Take the cash and put it in a place that yields more than 3.2%.
Over 9 years you’d made more money from the cash vs than if you just pay for the car straight. Paying loan every month also makes your credit score looks nice.
This is one of the logic used by actual “high income” people. Otherwise, standard personal finance practices applied.
Addendum: a car, like a house, should be thought of as a consumer goods rather than “asset”. Because that’s what they actually are. You buy the car to drive the car, not to park it there and hope to sell it for some profit someday.
Again, consider this a “high income” logic.
@schnolhamor Firstly, car loans are flat rate, convert to effective rate first. Next, different tenure may have different rates. The real question is what can you get from the difference of the actual monthly payments. If you can place the difference somewhere that can can generate more profits compared to the extra interest, go for the longer tenure. Otherwise take a shorter loan. Doing otherwise in my opinion is just stupid.
@schnolhamor T1 method here. Those who have 1 million, 5% interest yearly enough to cover a 250-300k car installment about Rm3-4k+.
Interests pay the loan. Car loan is low interest, no reason to 3-5 years.
Interests pay the loan. Car loan is low interest, no reason to 3-5 years.