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There is a simple habit that can save you thousands of ringgit on your home loan, and most homeowners don’t know about it: paying your monthly instalment early instead of on the due date.
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Ask Jason on WhatsAppWhy paying early can help
Many Malaysian home loans calculate interest on the daily outstanding balance. If your instalment is credited earlier in the month, your balance drops earlier, so you pay interest on a slightly lower amount for more days. The saving goes towards your principal, so the loan also finishes a little sooner.
Example: RM1 million loan
Take a RM1,000,000 loan at 3.7% over 35 years. The instalment is about RM4,250 a month. Here is what changes if it is paid earlier each month, assuming interest on the daily balance:
| Instalment credited on | Total interest over the loan | Saving vs paying on the 28th |
|---|---|---|
| 28th of the month | about RM759,000 | – |
| 8th of the month (20 days early) | about RM752,000 | about RM7,000 |
| 1st of the month (27 days early) | about RM749,000 | about RM9,500 |
Same instalment, same salary, just different timing. It will not make you rich, but it is money you would otherwise hand to the bank for nothing.
The catch: check your letter of offer
Not every loan treats early payments the same way. Before you change anything, check:
- How interest is calculated: on the daily balance, or monthly?
- How early payments are applied: some banks hold them until the due date or treat them as advance payment rather than reducing the balance straight away.
- Your loan type: term, semi-flexi or full flexi loans each handle extra and early payments differently, and some charge fees for flexibility.
Don’t just ask your banker how much your monthly instalment is. Ask how you can reduce your total interest. If you are still at the application stage, see how banks decide how much you can borrow.
Choosing a loan package? I can connect you with bankers who will explain how each package handles early and extra payments.
General information, not financial advice. Figures are illustrative; each bank’s terms differ. By Jason Lim (REN 84424, IQI Realty Sdn. Bhd. E (1) 1584/6).