How to Fully Utilize Maybank ASB Loan

A few days ago, I came across a discussion about ASB loan offered by Maybank. Actually, I have heard about the loan before and it seems like a very good investment for those of you who don't have much capital (like me!) as you don't have to pay lump sum to get maximum dividend. However, I never thought that we can utilize this investment so that we only need to pay the installment for the first year only, and at the end of the tenure, you will get the full amount of the loan.

Okay, so the plan goes like this. Choose whatever amount that suits you, for the longest time period, i.e. 25 years.

A) RM 50k      - Monthly RM 277
B) RM 100k    - Monthly RM 552
C) RM 150k    - Monthly RM 827
D) RM 200k    - Monthly RM 1102

For other amounts, you can see it here.

These amounts are based on the current BLR of 6.05% minus 1.65%. So the total interest rate is 4.6%. As discussed in this blog, the dividend rate of ASB funds never went below 8.55% since the last 20 years. So, even if the BLR is raised until 10.2%, the dividend payment can still cover the increment of the interest rate.

The trick here is that when you apply for the loan (Jan-Feb is recommended, I'll explain later on this), you need to pay the monthly installment for the FIRST YEAR ONLY. For the next year, you can withdraw the dividend from your ASB account and use the income to pay for the whole of that second year. This process is repeated in the following year until the end of the 25 years.
The calculation is more or less like this:
Loan Amount = RM 50k
1st year Installment = RM 3324 (RM 227 x 12)
Expected Dividend = RM 3500 (Based on 7% dividend)

So, for the second year, you can use the dividend from the first year to pay for the installment in the second year. After the completion of 25 years, you will get the RM 50k, with only RM 3324 as initial investment. In my opinion, this is a good way to save some money for our future needs.

Why I said to apply for the loan in January or February? This is because the financial year for ASB is on the 31st of December and the dividend is calculated monthly. So, if your loan starts in June, you will get only 50% of the expected dividend. Thus, if your loan starts in January, you'll get the full dividend for that year.

But some of you might say that 25 years is a very long period. For me, I personally believe that ASB can sustain its growth and in some not-so-distant future, we'll see the increment in the dividend as our economy grows.

However, if worse comes to worst, we can terminate the loan (after 2 year lock-in period) in case if the interest rate went beyond the expected profit or the dividend is not able to sustain the interest rate.

So, what do you think?

I'm hoping for your input as well, regardless whether you're a Bumi or not. There might be some areas that I overlook, so discussions are very much welcomed.

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