We are talking about two different term here, ASB & Overdraft. Everyone knows ASB is an investment fund that managed by ASNB, PNB’s wholly owned subsidiary. ASB is giving very attractive return & one of the highest paying dividend fund.
While, an overdraft (OD) is a type of bank loan facility where we are allowed to withdraw money from current account exceeding the available balance. The benefit of OD is, the interest is charged on overdrawn amount from your OD account on daily rest. This will be beneficial if you only need a short term loan. Comparatively interest rate for personal loan is charged on total loan amount
When we are talking about ASB-OD is, we pledge ASB certificate for an overdraft facility. The benefit of ASB-OD over normal OD is lower interest rate. This facility will be very beneficial to ASB account holders who at the same time have other debt such as credit card or personal loan.
Currently, only 3 banks offer ASB-OD facility. The table below shows the current offer which taken from respective bank website.
| Bank | Rate (%) | Maximum Allowable (% of ASB amount) | Fees (RM) |
|---|---|---|---|
| CIMB Bank | BLR – 1.65 | 90 | 160 |
| Maybank | BLR + 1 | 90 | 90 + 0.5% of OD |
| RHB Bank | BLR – 1 | 95 | 150 |
The advantage of ASB-OD is saving on interest rate. Let’s see on the following scenario to understand clearly,
Person A have the following
Saving in ASB – RM50,000.00
Personal Loan – RM40,000.00
ASB Dividend – 8.55% (2009 dividend rate)
Personal Loan Interest Rate – 1% per month (12% per year)
OD Interest rate – 3.9% (BLR – 1.65%) Current rate from CIMB Bank
Scenario 1 – Just remain as it is.
Dividend from ASB: 8.55% x RM50,000 = RM4,275 per year
Interest on personal loan: 12% x RM40,000 = RM4,800 per year
Net Interest Payment: RM4,800 – RM4,275 = RM525 per year.
You still need to pay monthly installment though.
Scenario 2 – Withdraw ASB money and pay personal loan.
Only gain 8.55% dividend from remaining RM10,000 balance in ASB which is equivalent to RM855 per year.
No more monthly installment but you only have RM10,000 in saving.
Scenario 3 – Use RM40,000 ASB-OD facility to settle out personal loan
Dividend from ASB: 8.55% x RM50,000 = RM4,275 per year
Interest on ASB-OD: 3.9% x RM40,000 = RM1,560 per year
Net Interest Earned: RM4,275 – RM1,560 = RM2,715 per year
Use this to pay the overdraft & you will gain more each year. At the end of the day you will have RM50,000 in saving.
No monthly installment but if you set aside some money to pay the overdraft, you will own RM50,000 faster.
From the above scenario it is clear that the ASB-OD facility gives better saving on interest.
This is just an example, you can use it for many other purpose. Just use your imagination and make calculation whether it is worth it or not.
This is the basic concept offered by my friend’s financial planner. Using ASB and bank overdraft.
Overdraft to pay debt??? How to calculate the daily rest interest?
How much do I earn at the end of my debt if I got RM 50K ASB-OD facilities from RHB @3.9% interest and I use it to pay my car loan RM 40K @ 6.5% . I need to pay RM 883 monthly for 5 years. How much do I need to pay back to RHB by monthly basis?
Please help me ……confused. How could I get benefit from the OD?
If you want to use to pay your car loan, I don’t think it is worth it. But why your car loan interest rate is so high?
Let try to calculate, it is not that difficult,
Remain as it is:
Dividend from ASB: 8.55% x RM50,000 = RM4,275 per year
Interest on car loan: 6.5% x RM40,000 = RM2,600 per year
Net Interest Earned: RM4,275 – RM2,600 = RM1,675 per year.
Use ASB Overdraft to pay car loan:
Dividend from ASB: 8.55% x RM50,000 = RM4,275 per year
Interest on ASB-OD: 4.15% x RM40,000 = RM1,660 per year (based on BLR 5.8%)
Net Interest Earned: RM4,275 – RM1,560 = RM2,715 per year
OK, you save about RM2,715 – RM1,675 = RM1,100 per year through this method but remember BLR may increase & cause the saving to reduce.
On the monthly repayment, I suggest you pay the overdraft facility the same amount that you use to pay your car loan. Your debt with overdraft will finish faster than your car laon if BLR does not increase so much.
The minimum monthly payment is just the interest rate (40k x 4.1%/12= 136.67) but your debt will never finish. That’s why I suggest you pay as much as your current car loan.
However, in the end I believe it is not so wise to do as the saving is quite small compare to the risk that you facing.
Gotcha…the 6.5% interest rate just for calculation only…not a big issue.
What about the RM50k at the ASB? It is not vanish isn’t? Seems like I still have the RM50k ASB cert on the 300th month. And at the same time my car loan also finish. Is it thru?
By the way you didn’t answer me the actual calculation of the overdraft monthly interest yet. Let say I will pay the same amount to RHB as I pay the monthly car loan..
Norman Confuse.
OK, Just remember that this method will no work if the OD’s interest is higher that the loan interest rate.
The RM50k will not vanish as long as you can the the money you owed from OD facility. Yes, you use the overdraft money to pay your loan, but now you have OD to serve. This is at lower interest rate.
To make the calculation is quite long, so basically, you have to pay interest rate of RM136.67. The, extra payment will be reduce the amount of OD that you utilize. So, for subsequent month you interest will be lower. After sometimes your OD will be fully paid.
It’s ok.
Is there anybody out there known the calculation of the daily rest interest. actually I wanted to know how much I need to pay the interest of the OD and plus it with my cash money to pay the OD provider.
How much to pay and How long do I need to pay and How could I make it shorten is the ultimate result I need to know.
Happy OD
Norman Confuse.
Norman,
To calculate daily interest is not difficult. It just long calculation. Basically it is like this,
Example
On 1st of Jan you owe RM10k
On 10th Jan you pay the bank RM1k
On 25th Jan you pay the bank RM1k
So the daily interest from 1st to 10th Jan = RM10k x rate/365
So the daily interest for 11th to 25th Jan = RM9k x rate/365
So the daily interest for 26th Jan onward = RM8k x rate/365
and so on.
The total interest you need to sum up all the daily interest.
I hope it is clear
ok..now it’s clear enough. I’ve look thru many webpages but couldn’t find the formula.
Last 2 years, I have been introduced by a CFP to reduce my debt payment length. I need to pay certain amount of RM for him to monitor my total debt reduction program but how would I know if it is a acam or not then I just ignored him.
And for you..What if I “pay” you a visit..
hahaha… it is time to hunt down the OD provider and pick the best one only.
Much like to play around with the interest rate figure.
Thanks very much.
Good that you understand.
I don’t think CFP is needed. You can get many free information in the internet.
If you want to contact me, leave me your details in “contact form”
Dear sir,
ive made ASB-I loans for 65k..now im thinking applying OD using that..
the question is, can i?
if can, can you please help me on how to do it.
tq
Sorry to say that OD is not eligible for fund that coming from ASB loan. This is because bank already hold your certificate.
How long usually do I have to pay the OD?
The minimum is only to pay the month interest. If you want to settle faster then you have to pay more.
Is it only for BUMI?
dear sir, i would like to ask regarding this od facilitiy.. is the facility still available at this moment? i heard some of my friend say, that the personal asb-od facility is not available anymore.. is it true?
Yes, the facility was freezed by PNB at the moment.
Sir,
I have secured Bank Rakyat Loan RM50k (5.25%)monthly commitment RM430 , and at the same time having personal loan RM46k – monthly commitment from HSBC (10.5%).
what should I do:
1)Can I do ASB certificate RM50K and place overdraft ASB with the bank?
2) And settle the HSBC loan…
or … do another ASB certificate …?
Pls advise
Harry, I believe now, ASB overdraft no longer available.
Regarding your personal loan, if interest rate for both are base on fixed amount. I think you better use Bank Rakyat loan to settle your HSBC loan. Unless you have another plan with the money.
Dear Otai,
Is there any bank facilities just like ASB-OD?
I surfed the RHB website and found still got sound like ASB-OD…and things like unencumbered ASB. Why is it still there?
jonet, for the time being, the facility no longer available.
Hi…
As a background, i have 2 CC with minimum payment of 1k. I came across with idea of OD. I do know that personal ASB – OD has been freeze by PNB but then there another option that can be done for ASB – OD by using company. But i do not have much information on this. Can you explain more as i intend to create a company and do the OD and at the same time knock off my CC.
Thank you.
amirini, I don’t know the availability of this facility as of now. Better check with CIMB, Maybank or RHB Bank. Regarding using it by using a company, I heard that you to have some business & the OD money used to facilitate your business.
hi,
If i make OD, how can i get the asb cert back? is it in some period of time or until you lump sum the money?
thanks
only when you cancel the OD facility.