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5 Reasons You Should NOT Take ASB Loan

BySuraya
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I took RM50k in ASB loan back in 2011, when I was 22 years old. It was one of the best financial decisions I’ve ever made. I remember feeling excited over my first-ever ASB dividend payout – I received RM2.4k for the year by just paying RM289 every month!

What is ASB financing

If you want to know what is ASB financing, it’s basically when you take a loan from the bank specifically to invest in Amanah Saham Bumiputera, one of the fixed-priced funds offered by Amanah Saham Nasional Berhad (ASBN).

How ASB financing works

How ASB financing works is, once you take ASB loan, the funds are IMMEDIATELY placed in ASB. You CANNOT take the initical capital out or use it for other purposes.

Note: ASB loan is the same as ASB financing is the same as ASBF.

As mentioned above, taking ASB loan was a good decision for me, but as with everything else, there are some good reasons NOT to take advantage of ASB loan. Here they are:

Reason No #1 – You’re not categorised as Bumiputera

Unfortunately, ASB investment is only for the Bumiputera – that means the ethnic Malays, Orang Asli and the indigenous communities in East Malaysia. So that means if you’re not Bumi, there’s no point doing ASB financing – your application will be dismissed anyway.

Yes, it’s not fair. Yes, it should be needs-based rather than race-based. Personally, I’ll continue to speak out against it and I encourage other Malays to do the same.

Related: [PERSONAL] Malay and Money: A Reflection

ASB for non-Bumi is not possible, but you CAN get ASM – Amanah Saham Malaysia fund. Similar to ASB, ASM is a fixed-price fund. ASM for non-bumi used to be notoriously hard to get, however nowadays you can get them easily through the Financial Planning Solution Package.

*There are no ASM financing or other loans for investment that is similar to ASB financing

Ok, assuming you are classified as Bumiputera. What are other bad reasons to take ASB loan?

Reason no #2 – If ASB returns are consistently lower than ASB financing rate

Remember this: Taking a loan to invest *only* makes sense if the returns are consistently higher than the financing rate.

asb loan

Between 2010-2020, the annual returns for ASB investment ranged from 4.25% to 8.9% (source: MyPF.my’s page on ASB annual returns). It is true that ASB returns have been shrinking in recent years and the lowest it’s ever been in 2020.

On the other hand, ASB financing rates are between mid-to-high 3.xx% to low 4.xx%* (see what affects the financing rate below).

Therefore: while ASB returns and ASB financing were dangerously close in 2020, the former was never lowER, and as of time of writing, has only been a one-off event and not a pattern (yet).

HOWEVER, if say ASB investment performs worse than 2020 in the next few years, then yes ASB financing wouldn’t make sense anymore. You’ll be losing money. Why take ASB loan to invest if you’re going to lose money.

Common question: What ASB financing rate can you get? How to get the lowest ASB interest rate?

As a general rule, the lower the ASB financing rates you can get, the better. Your ASB interest rate depends on:

  • how much you borrow (you get better rates for RM50k ASB financing and above),
  • the base rate (BR),
  • taken with takaful or without,
  • which bank (and bank agent) you got it from,
  • etc (tell me if there are other ways to get good ASB financing loan rates in the comments section!)

However, even the best ASB financing rate doesn’t matter if..

Reason #3 – Your income is unstable AND you have little-to-no savings

The thing about taking an ASB loan is you have to pay them back every month. It doesn’t care if you had reduced income a few months in a row, or if you lost your job, or if you have to pay for medical emergencies, or whatever. The instalments go on.

The actual numbers depend on your ASB financing rates, but this is how much will be deducted automatically from your bank account every month, assuming you took a 20-to-30-year ASB loan:

  • RM10k ASBF (min amount) – RM4x to RM5x per month
  • RM50k ASBF – RM2xx to RM3xx per month
  • RM100k ASBF – RM4xx to RM5xx per month
  • RM150k ASBF – RM6xx to RM8xx per month
  • RM200k ASBF (max amount) – RM9xx to RM1,1xx per month

Source: ASB Maybank financing monthly instalment repayment schedule.

So yeah. How confident are you to pay up to RM1,1xx per month for the remainder of your term? Thankfully, it is possible to cancel the ASB loan and generally speaking, the penalty is minimal, if any. Check with your banks and the contract you signed.

(Alternatively, you can also pay instalments using past years’ ASB profits. Some people call this the ‘rolling’ strategy. I think it’s better to not touch profits and let it compound, unless absolutely necessary aka for health or safety reasons ONLY)

Reason #4 – Banks don’t let you borrow money from them

How to take ASB loan if banks don’t let you borrow from them? You may want but you may not be able to get.

There are a few situations where you can’t secure a loan from the bank, not just for ASB financing but also other types of loans like home loan, hire purchase (aka car loan) and more. You can read more in this LoanStreet article, but briefly, here are some causes:

  • Don’t have steady job
  • Don’t have/can’t show income source (if from business, you need documentation)
  • Already have too many loans/commitments
  • Blacklisted
  • You want ASB financing-i but only offered ASB financing

Personally, while my RM50k ASB loan in 2011 went through, my application for RM150k loan around 2018 failed. I think it’s because my income fluctuated too much since I became self-employed, but I don’t know for sure.

(A part of me slightly regretted not taking a higher ASB loan amount, but I also know early 20s-me would have struggled with the payments, so I made peace with it.)

Reason #5 – Taking on debt bothers you

Some people just don’t sit well with taking debt, any debt, and that’s fine. I kind of even get it.

If that’s the case, you can do normal ASB saving without the ASB financing – just put in RM100 or RM200 or however much you can afford into ASB every month. You can also do other investments.

Related: What to Invest with RM1000: 15 Options You Should Know

Other reasons not to take ASB Financing? + FAQ on ASB Loan

These are 5 reasons NOT to take ASB financing that I can think of. If none of them are problems for you, then perhaps it’s not a bad idea to get it. Again, I’m personally happy with my decision to both take ASB financing AND add on more funds to my ASB by regular saving – my goal is to max out the RM200k cap ASAP.

Lastly, let’s quickly go over some frequently-asked questions:

Where to get ASB loan

You can get ASB financing from:

Is ASB financing worth it?

Is ASB financing worth it? Scroll back to #2, the section on ASB return rate and ASB financing rate. Basically, if ASB returns are consistently lower than ASB financing rate, then ASB financing is NOT worth it.

The reverse is true. If ASB returns are consistently higher than ASB financing rate, then it is worth it.

Historically, ASB financing is worth it.

Should I take ASB loan Maybank? ASB loan CIMB? ASB loan from other banks? Which one?

Generally speaking, the lower the rate, the better. So if ASB loan Maybank give you 3.5% (let’s say) and ASB loan CIMB give you 3% (example), then pick the lower one.

Go and ask around, but in my experience, Maybank seems to have the lowest ASB financing rate.

Another consideration is the Takaful that comes with ASB financing – just check if included and how much is the additional cost, if not included. Yes, you need it.

How to get the lowest ASB interest rate?

You will notice that most people have different ASB interest rates, and some people are offered lower ASB interest rates than others. That’s because ASB interest rate depends on:

  • how much you borrow (you get better rates for RM50k ASB financing and above),
  • the base rate (BR),
  • taken with takaful or without,
  • which bank (and bank agent) you got it from,
  • etc (tell me if there are other ways to get good ASB financing loan rates in the comments section!)

How to terminate ASB loan

If, for whatever reason you want to terminate ASB loan, you can do so by contacting your bank and request for termination. The penalty is usually minimal, if any.

Tabung Haji vs ASB

Tabung Haji vs ASB – which is better? The answer is actually… both. Do both.

Both Tabung Haji and ASB are suitable for savings and low-risk investing purposes. Personally, I earmarked my Tabung Haji savings for Hajj purposes and earmarked ASB savings for emergency savings/ general savings.

Tabung Haji may have an edge over ASB if you don’t want to go through the hassle obligation of paying Zakat ASB, which can get pretty complicated. The good folks at Tabung Haji will help you to zakat out your Tabung Haji savings, if eligible.

Learn more about paying Zakat in my Complete Zakat Guide article.

ASB vs Unit Trust

ASB vs unit trust – which is better? Objectively speaking, ASB wins, hands down. My reasoning:

  • You can’t get loan to invest in unit trust (personal loan doesn’t count and doesn’t make sense)
  • Which unit trust are you comparing with ASB? There are hundreds of unit trusts. *Of course* some of them will outperform ASB dividends, but most will not, and do you really want to test your luck
  • ASB dividends are more stable compared to the vast majority of growth (read: high-risk) unit trust
  • You simply can’t beat ASB’s sales charges. It’s 0%. Unit trust’s sales charge can go up to 6%

To be fair, I’m not the biggest fan of unit trust. My only exception is unit trusts with no/low sales charge like Private Retirement Scheme (not all platforms offer 0% sales charge for PRS), and the ones offered through BEST Invest.

Related: 3 Ways to Pick the Best Unit Trust in Malaysia (Advisory & DIY Method)

Conclusion

Any of you took ASB loan? Where did you get it from, how much, and what ASB loan rates did you get? And – most importantly – are you happy with your decision? Share your experiences in the comments section below!

Obligatory disclaimer: not financial advice, just lots of research and personal experience


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28 Comments

  1. I took a rm200k loan in 2013 from Maybank. Tenure 10 years. Things that u must know b4hand are:
    1. The 1st year loan repayments must be from your own savings or income. You cannot use the ASB returns yet as they have not come in.
    2. The 2nd, 3rd and even 4th or 5th year loan repayments may still need to be topped up with yr personal funds as ASB returns aka dividends may most likely be not enough to cover the instalments.
    3. The only way to avoid No.2 situation above is to lenghthen the loan tenure. So in my case it shld hv been 20 years. Since I only took 10 years because I didn’t want another 20 yr loan on top of my existing housing loan, i had to top up a fair bit.
    4. The whole idea and concept is ideal but depends totally on a higher ASB return (ideally 7% to 8%pa) and provided yr ASB loan rate does not fluctuate. Ie. Must be fixed.
    5. I redeemed my loan sometime in 2017 or 2018 as returns were starting to decline and as expected further declined further thereafter. Upon redemption, I received approximately RM20k or 25k profit [can’t remember] (even after deducting my top up amounts). I think I exited in good time as the returns declined steadily after that and I would probably not have made any profit if i chose to stay on.

    Reply

    1. Thanks Linda for expanding the ASBF ‘rolling profit’ strategy. Personally I have no regrets continuing to pay instalments from my own funds instead of prev years’ profits

      Reply

  2. If asb returns only 1-2% after deduct asb financing rates, can considered as quite bad?

    Reply

    1. if you have RM10k-200k to compound right from the start, then no need to do asbf at all. but if not, then as long as nett profit > total financing (plus fees, if any), all good

      Reply

      1. Assalamualaikum warahmatullahi wabarakatuh and hello, I’m planning to take an asb loan finance 200k for 5 years tenure. I’ve checked from the comparison website shows that bsn offered the lowest interest charges 3.45% , and monthly payment around 3634. What’s your opinion? If asb dividen rate go below 3.45% , should I scrap this plan? Since there’s no point in taking the loan. Thanks

        Reply

  3. The only way to win in taking up ASB Financing is to let the dividends to be compounded over the years. Easier said than done I know, but if you have the capability to contain yourself from withdrawing the dividends, please do so. You’ll be amazed with the outcome (coming from personal experience).

    Btw just to share in case it might help, Maybank has this new “product” called ASB Plus, sort of like you could refinance ur existing ASB loan with an even lower interest rate which provides you with 2 benefits; lower monthly instalments and cash refund. I shared about it in my tweet https://twitter.com/irfanothmann/status/1393106462956691459?s=21

    Reply

    1. Thanks for the info on ASB Plus, Irfan!

      (Also – allow me to flex, but I didn’t know it’s hard to NOT withdraw dividends. Most of the time I continue paying my ASBF and barely pay attention to it)

      Reply

  4. hi suraya,thanks for this article.Love reading yours.As banker previous with cimb and now with another bank.MORE THAN 6 years experience in asb loan financing processing,i can tell asb financing still relevan even worse economy.Better than never.Its good to create saving habit for youngsters.I facing lot of customer experience and alhamdulilah asb main focus to bumi.If not surely this fund fully utilise as ASM ,ASIM,ASW 2020 and other fixed income under asnb which dividen around 5-6% which better than fixed deposit provided from the bank.

    I write alot about asb financing in my blog.irdargarmin.blogspot.com.

    and i love reading your website too.Feel free to contact me incase u need asb financing advised too via email irdagarmin@gmail.com.

    thank you suraya.keep on writing ya.

    Reply

    1. Thank you Irda for the comment and financing advice offer 🙂 Don’t know about the rest but the ‘force-saving’ part worked for me!

      Reply

  5. Hi Suraya

    Thank you for your article. It is very informative. According to my calculation, you paid RM3,468 but you were only receiving RM2,400. How are you profiting from there?

    I had some discussions with my friends and it seems that it is not worth to get ASB Loan because of the inflation and the opportunity cost.

    I have enquired at the bank when I wanted to opt for the scheme. They gave me a sheet of payments for 20 years. When i did the calculation for 20 years, I seem to have calculated that the dividends wouldn’t be able to cover the inflation and the bank interest rate. Am i missing something here?

    If the ASB dividends are say, 5%. and the bank interest is 3% and the inflation rate is say 3%. How am I profiting?

    When i calculated your first year the extra payment is 3486-2400 = RM1068
    That is extra payment of about RM1100 due to 3% inflation

    If we are talking about ASB compounding dividends, there is also inflation rate which is compounding as well.

    I hope you will be able to answer my question because I really do want to opt into this

    Reply

    1. Hi Sara,

      Inflation rate is not factored in the calculations 🙂 If that’s your worry, then wait until asb profit rate is consistently higher than asb financing rate plus inflation

      Reply

      1. The ASB Loans rate follows the OPR rate. So when OPR rate increases, so does the ASB Loan rates.
        Example: when the ASB dividends was at 7% (few years back), the OPR rate was at about 2% (not included bank interest (3%) and inflation (3%) yet)

        Reply

  6. Took ASBF 200K at the end of last year since it has already been in my financial planning since my university years.
    As a young working adult, my expenses are just a slight bump from my student days. Got an offer from CIMB 800/mo for 40 years at a 3.8 interest rate.

    Am planning to terminate after 5 years, calculated the difference compared to using normal ASB, there is almost 30% difference in the final payment receive (considering 6% interest p.a, if its 5% p.a then the difference is 15-20%, which is still good enough for my liking). Hope the dividend won’t drop below 5 again this year, then should be a pretty safe investment

    Reply

  7. loan asb menguntungkan jika:
    1. installment menggunakan duit sendiri cuma dilakukan pada tahun pertama sahaja dan tahun-tahun seterusnya menggunakan dividen utk installment tanpa top up termasuk kos2 yg lain..
    2. untuk mengelakkan top up, sebaiknya ambil tempoh maksimum pinjaman untuk installment..jika kadar faedah naik, installment pun takkan dinaikkan dalam nilai yang agak besar..secara kasar, dgn tempoh yg maksimum, jumlah installment dlm setahun selalunya lebih rendah dr kadar dividen..apapun kira balik jadual pembayaran terkini pd setiap bank yg menawarkan pembiayaan asb..
    3. Berdasarkan pengalaman sendiri yg lepas, ‘keuntungan’ akan bermula selepas tahun ke 4..
    5. Dlm pembiayaan asb, konsep leverage digunakan, bank ‘leveragekan’penama asb utk mendptkan keuntungan dgn modal yg besar, kita yg penama asb ‘leveragekan’ modal bank iaitu dlm bentuk sijil dgn modal minimum iaitu duit sendiri je pd tahun pertama..oleh itu segala jenis kadar tak perlu diambil berat sangat, memadai pengiraan yg mudah je..
    6. dlm bahasa paling mudah, selagi selepas tahun pertama, cuma dividen asb shaja yg digunakan utuk membayar installment, kita masih belum rugi apatah lagi pembiayaan yg dah melepasi tahun keeempat, lagi best😂
    7. mungkin boleh terminate jika selepas tahun pertama terpaksa top up setelah mengambil tempoh maksimum dlm pinjaman..apapun kena kira balik kerana adakalanya, kena rugi dulu, baru dapat untung..
    8. kesimpulannya, rule pertama dlm pembiayaan asb ni, modal dr duit sendiri cuma pd tahun pertama shaja..elakkan mengambil dr bank yg mengkehendaki installment bulan2 shja tanpa option installment lump sum..

    Reply

    1. Hi Wan,

      Itu strategi ‘rolling dividend’ bukan? Pakai duit untung dividend dari tahun 1 untuk bayar tahun 2 keatas

      Boleh je. Untuk saya, prefer tak usik langsung duit dividend, biar compound lebih banyak 🙂 Biar dia ‘bekerja’, kita fokus tambah income je

      Reply

  8. I’ve apply asb financing since oct 2021, and the dividend 5% is quite good as it has profit from my installment through dividend. Somehow I might be worry for upcoming dividend and hope that the economy can recover as 6 months left:(

    Reply

    2. Hi Aqid,

      Its best to get a few quotations from several banks (or at least 2 from major banks) because (1) rates change all the time, and (2) you may not get the best rate possible due to your personal circumstances (average-low credit score, etc)

      Reply

  10. Hi Suraya,
    Thanks for the great content. I do agree Bumis are lucky to have ASB and ASB loans. However, it is sad to see those who needs the money queue up in banks to withdraw the interest immediately after new year, instead of letting the account grow. Life is hard, as their income is depressed.
    I heard about the BSN ASB loans for B40, I have not seen it in BSN website. Any info on this?
    I’m using Maybank for my ASB loan, so far Maybank does not charge interest for late payment.
    ASB returns have been poor since 2020 (Tarik rambut while crying).. so pls PNB, if you really want to help out Bumi to get out of poverty, do better in 2023. ASB is all we have.

    Cheers

    Reply

    1. Hi Ros,

      Thank you for your comment

      Easier said than done, but control what you can – ie your income potential. Rather than what you can’t – ASB returns

      All the best to you

      Reply

  11. Hi, there is something i want to ask. 31/5 last month i open my new bank account. the bank ask me to open my asb account. at first, i thought it was a normal asb so i just accept it. so they make me took the rm50k asb… but then i got a message from the bank saying that my payment for asb will start on 5/7 next month….im afraid that i can’t pay it every month cause i just started my work + the amount is too much for me. so i want to know how much i need to pay if i want to terminate my asb early??
    when i ask the bank agent they said i need to pay but never said how much should i pay back

    Reply

    2. Same with me. I just want to renew my card, then they ask me to open the asbf acc. And they said it’s not loan. Just financing

      Reply

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