Saturday, December 15, 2018

Hire Purchase (and Lease) Calculator


This useful hire purchase (and lease) calculator generate effective interest rate (and not just the flat rate quoted by the banks that is useless for comparison of loan offers)

  • You can use effective interest rate to compare various hire purchase/ lease offer. It can even compare loan with same quoted flat rate but with variation of making final instalments upfront.
  • You can use effective interest to compare with other interest rates like housing loan interest rates or fixed deposit rates, etc.

You can download this Hire Purchase Calculator here.


Should you get a hire purchase loan or use the extra money you kept in your flexi-housing loan to pay for your new car? It can be confusing.

It is difficult to know the true interest cost of your hire purchase (or lease) because the interest rate is quoted in flat rate. This flat rate is not comparable with the interest rate we usually use for fixed deposit or housing loan.

For instance, a flat rate of 3.5% for a 5-year hire purchase is equivalent to effective interest rate of 7.56%. We cannot use the flat rate 3.5% to do any comparison. However, can use this 7.56% interest rate to compare with housing loan rate of 4.25% or fixed deposit rate of 3.25%.

A 3.5% flat rate of car hire purchase loan is MORE expensive than your 4.25% housing loan rate.

This useful hire purchase calculator helps you to calculate the effective interest rate based on flat interest rate quoted in hire purchase or lease.

Enter value to the grey color cells.
This calculator calculate total interest cost, installment amount, total repayment amount, and effective interest rate. It allows you to compare various HP or lease offers and even with housing loan.

This calculator generate repayment timetable with specific dates.

Repayment schedule.

With repayment schedule you can know the amount of early repayment and the last instalment.

This calculator can be used to calculate leasing or hire purchase loan of your business equipment too.

Some leasing companies offer lease agreements that require you to pay your final instalment(s) upfront. Such arrangement increases your actual effective interest rate despite that the quoted flat rate remain the same. This calculator includes such factor to generate accurate effective interest rate.

You may download this Hire Purchase Calculator here.

Wednesday, November 21, 2018

How to Actually Save Money?

How to actually save money? It is not about packing your own lunch.

This article and video from Motley Fool stated that we simply need to focus on our three biggest expenses in our life, i.e. house, car and education. While I agree with the author, there are variations for Malaysians.

Here is the article from Motley Fool on How to Actually Save Money Below is the video from the same article.

In the context of Malaysians:

  1. Clear understanding of what is a good enough house for your family. Make careful decision based on affordability of house/ apartment, size, amenities and location, and its potential to increase in value over the years. 
  2. Finding an affordable house that will increase in value over time is important. It will help to fund your next bigger house. When you retire your children left home and you can sell the house and move to a smaller condominium. The extra money funds your retirement.
  3. Always compare your home loan interest rate with the market rate. Negotiate with your bank periodically. 
  4. Use Flexi Home Loan, so that when you have extra money you can pay down extra loan amount to reduce interest cost or shorten loan tenure. When you need money, you can also withdraw the extra loan payments you made to the Flexi Home Loan account. So instead of keeping fixed deposit which gives you 2%-3% interest income, keep this money in your Flexi Home Loan account to reduce your interest expenses which is at around 4.4%-5.5%.
  1. Second hand simple model (e.g. MYR60,000 or less) vs brand new luxurious model (above MYR300,000)
  2. Use your extra payments made to Flexi Home Loan, instead of car loan, to fund your second hand car. (Home loan interest, as at today, is much lower than car loan. Note: Interest rate used for home loan is effective rate, interest rate used for car loan is flat rate. 3% flat rate of a 3-year car loan has effective rate of around 5.7%. The effective rate for home loan on the date of this post is around 4.4%.)

Student loan was almost unheard of during 1980's. It is a ridiculous loan that exists only because the university's fees has gone extortionately high. Here are a few comparisons:
  1. Quality public school fee (FREE) vs private school fee (MYR19,000 - MYR85,000 per annum)
  2. Local public or semi government funded universities (around MYR50,000 for entire 4 year course) vs overseas universities (minimum MYR400,000 to study 3 year in UK). For courses like accountancy, students can even study and take the overseas professional exam in Malaysia.
  3. Low education fees means you can free yourself from the financial slavery of student loan or save your parents' retirement fund. 
Choose your lifestyle