The myth of engaging 3rd party service to save housing loan interest

By Ally Che

Hi, my name is Ally Che, a professional property negotiator and affiliate Registered Financial Planner (RFP). This is my third article published in Apartment Penang.

There are many companies offering service to housing loan borrower (at a charge of course) to reduce their total loan interest payment and shorten total loan period. The question is do we really need this service?

To answer above question, we need to know how banks calculate interest of housing loan.

I actually notice there are some homeowners who do not know how to calculate interest of housing loan, so I think it is good to share the formula here. The formula is simple and can be used in most scenarios.

Currently the BLR is 6.05%. Assuming:
Loan package = BLR - 2% => Annum interest rate = 6.05% - 2% = 4.05%
Outstanding amount = RM100K

Interest for 1 day:
4.05% / 365 X RM100K = RM11.10

Interest for 30 day:
4.05% / 365 X RM100K x 30 = RM332.88

Simple, isn’t it?

Now we know how to calculate interest of housing loan, we could know how much of our monthly installment goes to interest portion

From above formula, it is clear to save interest; we either reduce the interest rate or reduce the outstanding amount. To reduce the interest rate, we either refinance or write to bank reduce the interest rate. If your loan already passes the lock in period, the bank will normally agree to reduce the interest rate, because they do not want you to refinance. However, please be aware, the lock in period restarts when you accept offer from bank to reduce the interest rate.

The other method to save interest is we pay more to reduce the outstanding amount. Please ensure you are following instruction in loan agreement when you pay more to reduce the outstanding amount. However, the instruction is easy to understand and you could always confirm with the bank.

So now, do you think we need to engage third party service to save interest of housing loan??

Best Regards,
Ally Che
+60124158081
allyche@consultant.com

12 comments

July 10, 2010 at 6:48 PMTan H.H.

i've tried to ask those agents who are doing this stuff. I will never get the answer i wanted everytime i asked. Every single of them will ask me to attend their talks which will held in their office or hotel ballroom. Do u think they really have a 'way' to help save on interest?????? I mean, other than refinancing or review loan package??

 
July 10, 2010 at 10:59 PMjohn64

I attended one session and the agent is asking for 9k for the fee to write a letter to bank to to review my loan of 600K and i have to withdraw from EPF in order for me to find excuse to write to bank.

 
July 11, 2010 at 12:03 AMadvance

I got one customer who nearly pay RM6K to one female agent for this service.......i ask him to go bank himself and ask for loan interest revision (his loan package is BLR++). He did it and save RM6K.

 
July 11, 2010 at 12:16 AMameer

The best way is just go to bank and see the loan officer and talk to revise the interest.

Sometimes we Malaysians want easy way out and gullible to attractive offers.

 
July 11, 2010 at 9:44 AMdavid

Try to do this.

Go to get a refinance package and once you got the offer, talk to your existing banker to see if they can match the offer on hand. When comparing the packages, do take into account of the moving costs such as legal fees & stamp duty.

 
July 12, 2010 at 12:13 AMTan H.H.

Hmmm... Suppose there's only 2 ways to save interest on loan and i knew it all the time. Stupid me cracking my head trying to figure out what's the plan those agents got up their sleeves. Wonder who got "cheated" by this kind of stuff. And JOHN64, why they ask you to redraw EPF? It's not like you can draw it anyway? I got at least 4 ppl in my Facebook work as the agents, and always sending invitation asking people to attend their courses.

 
July 28, 2010 at 11:44 AMFence

I believed some of you may heard of a company now heavily promoting “BLR Management”. It is some sort of helping loan taker to reduce the total repayment sum and period but of course there is a fees. Is it really worth paying this service and can we DIY it? Is there any alternative good tool we can use? Glad to hear from anyone to share their view. Thank you very much in advance.

 
August 1, 2010 at 11:46 PMFence

Hi Ally Che,

Could you help to provide advice on the services I mentioned above?

Thank you.

 
August 2, 2010 at 12:51 AMAlly Che

Hi Fence,
If you could read Mandarin, there is an interesting thread discussing this topic.

http://cforum4.cari.com.my/viewthread.php?tid=1215321&extra=page%3D1%26amp%3Bfilter%3Ddigest&page=1

Thank you :)

Best Regards,
Ally Che
+60124158081
allyche@consultant.com

 
August 2, 2010 at 9:37 AMFence

Hi Ally,

For benefits of all, i think it is best if this could be share over here in English too. TQ

 
August 9, 2010 at 1:46 PMSAM

Hi All,

The so call "BLR Management" had been bombed the market recently, it must have something in order to make this happened, i think the best is to find out by ourselves what is the service they provided in order to help us reduce the tenure and interest, i think everyone knowing that the interest that we pay to bank is equal to another house worth of that loan amount and furthermore the BLR had increased terribly this year. My friend just invited me to attend this seminar and i will be going with them, is there anyone interested? I am inviting as many as people to go there so that we can have discussion and analysis after the seminar, thanks.

 
October 19, 2010 at 11:20 PM3

If you want to solve your problem, pls write to dayeah728@gmail.com

I have shorten my load period by half.....by following the instruction closely.