Is an ASB loan worth it? Compare borrowing to buy ASB with investing the same monthly instalment directly.
You come out ahead by
RM 46,448.36
RM 170,814 of ASB after paying RM 124,366 over 10 years
You come out ahead by: RM 46,448.36
Borrowing comes out ahead here because the whole amount earns dividends from day one. It only works while the dividend beats the financing rate, which floats with the bank's base rate. Dividends aren't guaranteed (recent years: about 5–5.75 sen a unit), holdings are capped at RM300,000, and most banks add MRTT insurance.
RM100k at 4.5% over 10 years, 5.5% dividend
See the instalment, the ASB value at the end, and how it compares with investing directly.
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Dividend below the financing rate
Borrowing only pays when dividends beat the financing cost.
You end up behind
How the figures above are worked out — the rules, rates and reasoning behind every line.
A bank lends you money to buy ASB units up front. You repay it in monthly instalments, while the whole amount earns ASB dividends from day one. At the end of the tenure the units are yours.
It comes out ahead when the dividend is higher than the financing rate. If dividends fall or the bank's rate rises, the gap can turn against you.
The instalment is a standard reducing-balance repayment. Dividends are added to your units each year until you reach the RM300,000 holding limit; above that they're paid out. The comparison puts the same instalment into ASB each month with no loan.
Only if ASB's dividend stays above your financing rate for the whole tenure. Recent ASB distributions have been about 5–5.75 sen a unit, and ASB financing rates float with the bank's base rate.
ASB is open to Bumiputera investors. Banks such as Maybank, CIMB and BSN offer ASB financing, usually with MRTT insurance included.
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