See how much interest you save, and how much sooner you're debt-free, by paying extra or a lump sum on your home or car loan.
Interest you save
RM 48,507.05
Debt-free 5 yr 4 mo sooner, in 19 yr 8 mo
Interest you save: RM 48,507.05
For reducing-balance loans: home loans, and car loans under the June 2026 hire-purchase rules. A lump sum is assumed to keep your instalment and shorten the loan, which is what most banks do. Check for lock-in penalties, and whether a flexi or semi-flexi loan lets you withdraw what you prepay.
RM350k left at 4%, 25 years, +RM300 a month
Debt-free about 5 years 4 months sooner.
≈ RM48,500 saved
Lump sum from a bonus
Banks usually keep your instalment and cut the remaining tenure.
Same instalment, shorter loan
How the figures above are worked out — the rules, rates and reasoning behind every line.
On a reducing-balance loan, interest is charged each month on what you still owe. Every extra ringgit you pay cuts that balance straight away, so less interest builds up for the rest of the loan.
Home loans work this way, and so do car loans signed under the hire-purchase rules that took effect on 1 June 2026. On an older flat-rate car loan, early settlement saves much less.
Check your lock-in period: many home loans charge 2–3% of the loan if you settle within the first 3–5 years. Partial prepayments are often allowed without a fee.
With a flexi or semi-flexi loan you can usually withdraw what you've prepaid later, which keeps the money available while still saving interest.
Compare the interest rate with what your money could earn elsewhere. Clearing a 4% loan is a guaranteed 4% return.
Usually, if you have an emergency fund first. Each extra payment saves interest at your loan rate for the rest of the loan. RM300 extra a month on RM350,000 at 4% saves tens of thousands of ringgit.
Most banks keep the instalment the same and shorten the loan, which saves the most interest. Some will recalculate a lower instalment if you ask.
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