Note: Please note that the results from this calculator is for illustration purposes and are indicative only. Results do not represent approval of the loan which is subject to the bank's credit evaluation.
What is Car Loan?
A car loan, also known as an auto loan, is a type of secured loan that allows you to borrow money from a lender to purchase a vehicle.
Here’s a breakdown of what that entails:
Purpose:
Specifically designed to finance the purchase of a car, whether new or used.
Secured Loan:
The vehicle itself acts as collateral. This means that if you fail to repay the loan (default), the lender has the right to repossess the car.
How it Works:
You borrow a sum of money from a financial institution (like a bank, credit union, or dealership).
You repay the loan over a set period (the loan term) in regular installments, which include both the principal (the amount borrowed) and interest.
Factors that influence the loan:
- Loan amount: The sum of money you borrow.
- Interest rate (APR): The cost of borrowing, expressed as an annual percentage.
- Loan term: The length of time you have to repay the loan.
- Credit score: Your credit history significantly impacts the interest rate you’ll be offered.
- Down payment: An initial payment you make towards the car’s purchase, which reduces the loan amount.
Types of Car Loan
Fixed Rate Loans:
Pros:
- Predictable monthly payments: This makes budgeting easier.
- Protection against rising interest rates: Even if market rates go up, your payment stays the same.
- Simplicity: Easy to understand and calculate total loan cost.
Cons:
- Potentially higher interest rates: Fixed rates may be slightly higher than initial variable rates to compensate lenders for the risk of future rate increases.
- You don’t benefit from falling interest rates: If rates drop, your payment remains the same.
Variable Rate Loans:
Pros:
- Potentially lower initial interest rates: This can lead to lower monthly payments in the beginning.
- Benefit from falling interest rates: If the BLR decreases, your interest rate and payments will also decrease.
Cons:
- Unpredictable monthly payments: Fluctuations in the BLR can cause your payments to increase or decrease.
- Risk of higher payments: If the BLR rises, your payments will increase, potentially making the loan unaffordable.
- Harder to budget: Because of the fluctuating rates, it is harder to budget long term.
How To Calculate Car Loan
While online car loan calculators are very convenient, understanding the basic calculations is helpful. Here’s a simplified approach:
Calculate the Loan Amount:
- Loan Amount = Car Price – Down Payment
Calculate Total Interest:
- This can be more complex with variable rates, but for fixed rates:
- Total Interest = (Interest Rate / 100) x Loan Amount x Loan Term (in years)
Calculate Total Amount Payable:
- Total Amount Payable = Loan Amount + Total Interest.
Calculate Monthly Installment:
- Monthly Installment = Total Amount Payable / (Loan Term in years x 12)
Car Loan Interest Rate
| Bank | Interest / Profit Rate |
|---|---|
| Affin Bank | 2.92% – 3% |
| Maybank | 3.40% – 4.25% |
| CIMB Bank | 2.85% – 4.45% |
| Public Bank | 3.31% – 4.10% |
| Hong Leong | 3.24% – 3.78% |
| RHB Bank | 3.18% |
| Am Bank | 3.05% – 3.66% |
| BSN Bank | 2.55% |
| Bank Islam | 3% – 3.60% |
| Bank Rakyat | 3.30% – 3.50% |