Concept
Monthly Installment
What you pay each month sounds simple. The math underneath is where advertised rates stop telling the truth.
In plain English
Two loans with the same monthly installment can cost you dramatically different amounts over their lifetime. The gap comes from how interest is calculated — flat rate vs effective (reducing balance) rate — and most advertised SME loan rates are quoted in the version that flatters the product.
Flat rate charges interest on the original principal for the whole tenure, ignoring the fact that you're paying the principal down every month. Effective rate charges interest only on what's still outstanding. A 4% flat rate over 5 years works out to roughly 7.42% effective — same monthly payment, but completely different cost of money.
For term loans, the effective (reducing balance) rate is what actually reflects your cost of borrowing. If a banker quotes you a rate without specifying which version, ask. Any banker worth talking to will answer straight.
Try it with your numbers
Plug in your own loan. See the math a banker would do.
Every field updates live. The effective-rate line at the bottom of the result is the number credit officers use — the one you actually care about.
Stamp duty, legal fees, and insurance are excluded. We cover those live on WhatsApp, case by case.
Monthly installment
RM 9,783.07
Total interest paid
RM 86,984.45
Total paid over tenure
RM 586,984.45
We’ll tell you which bank actually funds this, and at what rate.
Worked example
RM 500,000 over 5 years — the same monthly, very different rates.
- Principal
- RM 500,000
- Tenure
- 60 months
- Flat rate quoted
- 4.00% p.a.
- Flat rate monthly installment
- RM 10,000.00
- Effective rate equivalent
- 7.42% p.a.
- Total interest paid
- RM 100,000.00
The bank quoted 4% flat, but you are really paying 7.42% effective. The difference isn't a trick — it's math. You need to know which rate is which so you can compare offers like-for-like. The calculator above shows the same comparison against your actual numbers.
What bankers watch for
- • Always ask whether a rate is flat or effective — it's the first question a banker respects.
- • Overdrafts, revolving credit, and cashline are typically effective rate from the start.
- • Term loans and hire purchase are more often quoted in flat rate in Malaysia.
- • Early settlement on a flat-rate loan rarely gives you the interest savings you might expect — the structure is front-loaded.
- • Two quotes with identical monthly installments can differ by tens of thousands of ringgit in total interest — compare total cost, not just monthly.
Run these numbers on your actual case.
Drop your real figures on WhatsApp. We’ll walk through the math together and tell you what a credit officer would make of it.