Loan for ASB investment

I guessed I never really wrote about this at all. Amanah Saham Bumiputera, or ASB, is one unit trust that's created specifically for Bumiputera people in Malaysia. I guessed ASB itself need no introduction as most of the non-Malay friends that I knew heard about ASB before. With relatively high incentive percentage rate, it makes most investors drool at it.

But that's not the main point for the discussion. I'll be touching more on ASB loans offered by some banks such as Maybank and Bumiputera Commerce Bank. A lot of people I know were put off by having the idea of taking loans to save money. But I have my points.

Point 1 - Dividend payout
First of the points that people always raise when I talked about this topic is, why take loans when you can save your own money into ASB and don't have to pay the bank a single cent? Yes, i agree with that point that you can save money by your own effort and put it in the ASB account every month. But are we getting the maximum effect?

ASB calculates the dividend by month of investment, i.e if you put your money in January that year, you'd have 12 months of dividend when they calculate the dividend for you, but you'll have only 3 months of dividend if you started saving the money in October the same year. For the sake of illustrations, let me give you an example. Every month, starting from last month (January), i keep RM700/month until the end of the year - i'll have RM8400 in my ASB account at the end of the year. Let's say ASB declared 10% dividend for this year, so you'll get RM840 in dividend.

WRONG! Remember when i said ASB will give you the dividend pro-ratedly? So you'll get something like RM455 only for that year (do the calculation yourself - if you are stuck, let me know i'll help you out).

Compared to taking the loan, i'm going to use this example. Let's say I'm taking a RM100,000 loan for maximum of 20 years, and i have to pay the installment of, say, RM750/month. The same dividend payout as the example above, and I'll have RM10,000 of dividend in my account. Yes, I may already be paying RM9,000 as installment, but I still have RM1,000 balance. And if I didn't take the dividend out and let it continue for the next years to come, I'll be filling up my ASB account (max RM300,000) in 7-8 years time.

Point 2 - Consistency in saving
OK, I'm still not convinced, you may say. I can keep money better than you do, so I don't need the ASB loan, you continued. Bravo, if you can have the discipline to save money. But can we? I know I can't consistently save money without being forced to - i have just too many evils around me that will do anything to entice my money away. With loan, I'll have something to commit on, and I'll have to find money to pay the installment no matter how tight my cashflow was that month. And don't tell me that you don't have the craving to upgrade to a bigger car, splurge a "little" on some fine dining when you have that extra cash.

I have to be forced. And so far, I'm loving it as I can managed to get my house down payment money from the dividends I got from the ASB loan

Point 3 - Lower loan interest
Yes, it's still based on BLR. But it's way cheaper than what i took initially - 4.5% for 1st year, BLR - 0.5% for 2nd year, BLR + 0.4% thereafter was what I was on earlier. As updated by my Maybank advisor (chewah!), the loan interest now is like this - BLR - 0.3% for 1st 3 years, BLR - 0.5% thereafter, and RM42 (only!) for processing fee. I paid like > RM600++ for processing when I took mine like 3 yrs back.

It didn't take me long to end my earlier loan to sign up for this. And oh, for settlement of that ASB loan (since i took for 20 yrs but opt out earlier), I'll get whatever money that I have already paid minus the interest. And I got the insurance premium back as well.

I don't have more points, as by point 3, i was already convinced that i needed help (externally) to save money. Eventhough it may meant I have to pay extra to the bank. I still save whatever extra money I have to ASB (although not much yet lah).

By the way, if you think I'm getting something out of this topic, think again. If you are interested, then good for you and please approach the nearest Maybank branch for more info. By the way also, only Bumiputeras need apply I'll leave the part why I can invest in ASB for another day's discussion.