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!
But as with everything else, there are some good reasons NOT to take advantage of ASB loan, or its technical term, ASB financing. It is also sometimes shortened to ASBF; to be clear, ASB loan = ASB financing = ASBF.
The loan is specifically designed to invest in ASB, one of the fixed-priced funds offered by Amanah Saham Nasional Berhad (ASBN). 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.
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.
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.
*ASB financing rates 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!)
The lower the ASB financing loan rates you can get, the better. 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 (see #2), 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
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
- 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.
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:
- Direct from banks – you can get from Maybank; Bank Islam; RHB Bank; Ambank; CIMB; Hong Leong Islamic Bank; Bank Muamalat; Affin Bank; and possibly more
- From agents – find them on social media. Get a few agents/quotations and compare ASB loan rates
- From ASB loan comparison site like LoanStreet
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.
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 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 How to Calculate Zakat? Which Ones to Pay? The 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.
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