ASB Loan Vs Traditional Deposit to ASB Account

How to Calculate Dividend 

Before I go further to explain pros and cons of ASB loan, let me clarify how the dividend is calculated. As some of you are aware, the dividend is computed monthly based on the minimum amount of the month but distributed annually. 

Example

Assumptions : 

• You have had RM500 since the 1st January 2012
• 7% dividend declared by PNB for the year of 2012
• no bonus is given

Dividend for January:  0.07/12 months *  RM500 =  RM 2.92 

Let say you put additional RM 400 in Feb: 

 

Dividend for Feb: 0.07/12 months * RM (500 + 400) = RM 5.25

In March, you forget to add money, so : 

Dividend for March: 0.07/12 months * RM (500+400+0) = RM 5.25

And the Calculation goes on for the next months. Thus the annual dividend for the year of 2012 would be: 

Dividend for 2012: RM 2.92 (Jan) + RM 5.25 (Feb) + RM 5.25 (March) + ............

Hope you guys could understand the above calculation. It is simple, yet many people get confused. Now lets go to the next issue which is ASB Loan 

ASB Loan 

At this stage, I'll just point out reasoning only based on  numerical advantage. Using the above formula, I've calculated the traditional way of saving money into ASB vs using loan; 

Assumption: 

• 7% dividend + 1% bonus every year for the next 25 years
• Rm600 payment monthly till reach quota RM 200k (for traditional way)
• RM600 payment monthly to loan (RM100k) for 25 years (for ASB Loan). Rate BLR-1.65

After 25 years: 

Traditional: RM 456K

ASB Loan: RM 675K

You may wish to note that I didn't deduct the total amount of money at the end of the 25 years for the ASB Loan with the total payment to the bank in which in this case is RM 600 * 12 months * 25 years =  RM180K. Some people may argue that we have to deduct it because we pay it to the bank ( other words is enrich the bank). Well, I beg to differ. You may notice that in the assumption above, I put some italic and bold on the 'payment' word. Yes, we pay to the bank for the loan. However, we also pay to the ASB to invest our money. See, it is the same thing! We PAY, so why is there a need to deduct the RM180K? 

However, in my calculation for the traditional way, I stopped putting money into the ASB account in my 15th years because it has reached the quota of RM200k. So that means, for another 10 years, I didn't pay any money which is equivalent to RM 600 * 12 months * 10 years = RM 72K. 

So yea, we have to deduct that 72K if we want to compare with the end amount of using ASB Loan; 

so the end amount of using ASB loan = RM 675k  -72K = RM 603K, which is still RM150k higher than the traditional way. 

Thank you, 

Yours Sincerely, 

Nama Saya Amad. 

Edit: Found the ASB dividend calculator at irwan.biz. Click Traditional way for calculation using ASB calculator for traditional way and ABS Loan for calculation using ASB Calculator using ASB Loan.