Malaysia Car Loan Interest Rates Guide for Students

Don’t have any idea how Malaysia car loan interest works and planning to buy your first car? Getting your hire purchase loan for your first car can be daunting for first-timers. But rest assured that it is not as complicated as it sounds!
Continue reading as we’ll go into the basics elements of understanding car loans and make you an expert in this subject

Interest rates for Malaysia car loan depend on several factors such as car type, new or used cars, bank offers, credit history and more.
You must take your time to compare which suits your situation the best before committing to the hire purchase.
With that being said, most car loans now run on fixed interest rates. This means that the interest rates are calculated based on the principle amount. NOT the reducing balance! (Yes, I know right!)

For example, if you are committing to a RM100,000 car loan today with an interest rate of 3.5% for 9 years. Your monthly repayment will be RM 1217.60.
Not sure how to calculate your monthly repayment? Don’t worry, there are plenty of online loan calculators available on the internet. You can check this car loan calculator here.

Should you go for Down Payment or a Full Loan?

Say that you are in a situation whereby putting a down payment is affordable for you. Hence, doing so is a good decision.
Why? That’s because you will be borrowing a smaller loan amount (which is based on the principle amount), thus reducing your total interest.
What if you don’t have enough cash flow for a down payment or perhaps you prefer to invest the money elsewhere?
There are situations whereby you may get a 100% full loan under special schemes. Otherwise, under normal circumstances, car loans require a minimum of 10% (of the car’s price) down payment for new cars. Whereas used cars require a 20% down payment.

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What is Guarantor or Collateral for Malaysia Car Loan?

Some banks may require a guarantor to complete your car loan, while some do not. Nevertheless, it might be better to get a guarantor’s help in your loan approval process. You might get better interest rates.
Even so, most banks do not require a guarantor as your car is technically used as collateral anyway. This means that banks will repossess your car if you are unable to pay the monthly repayment.
Although in times of bad economic situation, banks realize that car value depreciates over time. A guarantor might be needed to safeguard the banks’ interest. Particularly to protect themselves against further depreciating value due to poor car maintenance.

The Meaning of Loan Tenure, Repayments and Early Settlement

A car loan can typically go for a 3, 5, 7, or 9 years loan tenure. Loan tenure is the duration of your hire purchase whereby you are going to perform your monthly repayment.
You might need to consider your monthly commitments before deciding on the loan tenure. The longer the loan tenure, the more interest you will be paying in the long run.
In addition, expenses involving your future car should be noted down too! Expenses such as car maintenance, petrol, car wash, tyres, battery, car insurance, road tax and many more are a necessity.

Car Insurance and Road Tax

Purchasing a car in Malaysia includes mandatory car insurance as well as road tax. Otherwise, it is punishable by law if we don’t possess them before riding our wheels on the road.
Firstly, please remember to include the cost of car insurance and road tax into the loan amount/down payment consideration.
Car insurance costs more than our road tax in most cases. However, if there are no claims towards your car insurance, you will get a discount based on your NCD (No-Claim Discount) percentage.

Be Smart in your Malaysia Car Loan! Spend the Right Amount!

Purchasing your first car is usually the first biggest financial decision you’ll make in life. Never rush into a decision regarding your Malaysia Car Loan so quickly into a purchase! You don’t want to be in a poor financial situation and end up in bankruptcy.

Want more guides on purchasing cars in Malaysia as a student? Check out this PAGE!

Additional Reference: https://www.youtube.com/watch?v=gXuoWfy8tPw