How to Calculate Gross Closing for a Personal Loan (2023)

Updated: October 11, 2018

We all have different financing needs at different times in our lives. Sometimes we need cash for urgent needs, and sometimes we may want to pay off existing debts orFinancing of other financing needs.

In Malaysia, almost all banks allow early settlement of personal loans so that you can pay off your debt before it is fully due.

Why you should pay off your personal loan early

One of the reasons for this is when you want to get a mortgage to buy a house.

If you have heard of credit rating agencies such asCCRIS or CTOS, you should know that banks base their loan decisions on you based on your creditworthiness, which is derived from your existing loans, debt-to-payment ratio, repayment history, and other financing-related indicators—your financial health, so to speak.

Another good reason why you should pay off your personal loan early is to allow your money to reach its full potential. When you have an outstanding personal loan, you are always obligated to pay interest to the bank as a cost of the loan. If you're serious about achieving financial freedom or a stress-free retirement, tackling personal loans is one step toward that goal.

However, given that not many people know about the terms or benefits you can get, here are 16 personal loans in Malaysia and their early settlement terms to help you find a loan that suits your needs.

But first you should understand what is Rule 78 and the concept of Ibra, which will be used to calculate interest on a bank loan.

For rule 78, when calculating the ratio of principal and interest to be paid on the entire loan, it is assumed that the interest will make up the majority of the monthly installments at the beginning of the loan. Borrowers must repay all monthly installments for the remaining term, with discounts.

Calculate the discount according to "Rule 78":

(n-3) (n-2) x I/N(N+1) = R

R= Rabat (RM)

n = number of monthly installments for the unexpired period

N= loan period

I = Interest (RM) for the entire loan period

Example

Loan for 60 months (5 years) with a principal amount of RM 50,000 at 12% per annum, butEarly settlement after 20 months(if the advance payment was made to the bank before the next monthly due date), as follows:

of = 60

n = 60 - 20

I = 50.000 x 12/100 x 5 = 30.000

R (this is the discount on your outstanding loan)* = (40-3)(40-2)/ 60(60+1) x 30,000 = RM11,524.59

In relation to Islamic banking, Ibra' refers to discounts that Islamic banks give at their discretion to customers who settle their debts arising from sales-based contracts before an agreed settlement period.

Ibrahimović's formula:

Rabat = [n (n+1) / N (N+1)] x PM

n = months remaining until maturity

N = total financing period (in months)

PM = gross profit margin

try out:

Early settlement within 20 months

Funding amount: RM5000

Outstanding Bank Price: RM7320

Duration: 5 years (60 months)

Profit margin: 24%

n = 60 - 20 = 40

N = 5 years (60 months)

Afternoon = (RM5000 X 24% X 5): RM6000

Podbacaj (Ibrahimović):

[40 (40 + 1) / 60 (60 + 1)] X RM6,000 = RM2,688.52

Total mandate after Ibrahimović:

RM7,320.00 - RM2,688.52 = RM4,631.48

16 Personal loans in Malaysia and their prepayment requirements

1.Maybank personal loan

• Early Settlement Fee: RM200 or an amount equal to 3% of the outstanding loan amount, whichever is higher (Applicable only for settlement in the first half of the loan term.)
• Notice period: 1 month.
• Loan restructuring: Once the loan has been approved and disbursed, it is not allowed. Additional payments will be considered prepayments to reduce next month's installments. You will not be able to withdraw additional funds that you have already deposited.
• Discounts: Not available.

2.Personal loan in Hong Leong

• Early Settlement Fee: None.
• Termination period: written notice to the bank three months in advance or payment of three (3) months' interest on the redemption amount in lieu of termination.
• Discounts: available. Discounts will be based on '78 rule” or “Sum of Numbers” as shown above, used by most commercial banks in Malaysia.

3.Personal loan from Union Bank

• Early Settlement Fee: None
• Termination period: three months' written notice or price in lieu of such notice.
• Discount: Interest Subsidy is calculated as per "Rule 78" formula, you can refer to the same formula and above example.

4.CIMB bankai

• Early Settlement Fee: None.
• Notice period: 1 month.
• Reaction: Ibrahimovic's report is shown above.

5.Islamic banking Personal finance-i

• Early Settlement Fee: None.
• Termination period: Not specified. However, it is best to notify the bank at least one month in advance for early settlement. For more information, you can contact the Contact Center of Islamic banks.
• Discounts: According to the Ibra' formula. For more information, see the formulas and examples shown above.

6.UOB Personal loan

• Early Settlement Fee: Charged at 3% of the total outstanding debt (principal + interest), with a minimum amount of RM300, whichever is higher.
• Notice period: 1 month.
• Discounts: apply to the following formulas:
  • Rabat = C^r (r+1)/t (t+1)
    C = interest for the entire term
    r = number of remaining months of the monthly installment during the mandate
    t = entire term in months

7.HSBC Amanah personal financing-i

• Early Settlement Fee: None.
• Notice period: 1 month.
• Discounts: None.

8.Standard Chartered CashOne

• Early Settlement Fee: Not stated but applicable.
• Notice period: The bank gives you the total amount of the debt for at least 1 month.
• Discounts: None.

9.AEON Credit Services Personal financing

• Early Settlement Fee: None.
• Notice period: 1 month.
• Discounts: Available but not published.

10.People's Bank of China Personal finance-and private

• Early settlement fees: Applicable but not disclosed.
• Notice period: 1 month
• Discount: Applicable based on the Ibra' concept (see formula above).

11.MBSB Personal Finance-i

• Early Settlement Fee: None.
• Notice period: 1 month.
• Discount: Applicable based on the Ibra' concept (see formula above).

12.Executive National Savings Bank-1

• Early settlement fees: Applicable but not disclosed.
• Notice period: 1 month.
• Discounts: Ibra-based concepts apply. (See the formulas and examples shown above.)

13.Ambank Islamic personal finance-in the private sector

• Early Settlement Fee: Not disclosed.
• Termination period: Not specified.
• Discounts: Ibra-based concepts apply. (See the formulas and examples shown above.)

14.RHB Private financing

• Early Settlement Fee: RM100.00 or 1% of the outstanding loan amount, whichever is higher, if fully prepaid within the 6-month lock-in period from the date of the approval letter.
• Termination period: Not specified.
• Discounts: Apply under "Rule 78".

15.Citibank personal loan

• Early Settlement Fee: If you pay off the loan in full within the first two years or before halfway through the loan period, whichever is earlier, RM200 or 3% of the outstanding loan balance will be charged from the full payment date, whichever is the highest.
• Termination period: Not specified.
• Discounts: Not listed.

16.AgroCash-i Agricultural Bank

• Early Settlement Fee: Not disclosed.
• Termination period: Not specified.
• Discounts: Ibra-based concepts apply. (See the formulas and examples shown above.)

Based on this list, we hope it will help you better understand the requirements you must meet and the discounts (if applicable) you are entitled to for paying off your loan early. At the same time, we also encourage banks and financial institutions to provide more information to the public to help consumers make better decisions!