Personal loan repayment on flat-rate or reducing-balance terms.
Monthly repayment
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Total interest
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Total repaid
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The one number that decides whether a personal loan is cheap or expensive
Almost every personal loan advertised in Malaysia, whether from a bank, a co-operative, or a licensed money lender, quotes a flat interest rate. Flat sounds reassuring, but it hides the real cost. With a flat rate you pay interest on the full original sum for every year of the tenure, even though you have been steadily handing back the principal. So the headline percentage is not what you actually pay in effective terms. This calculator lets you toggle between flat and reducing balance precisely so you can see that gap in ringgit, not in jargon.
Who is this for? Anyone weighing a debt consolidation loan, a renovation loan, or a cash advance against a salary, and anyone who has been quoted a rate by one lender and wants to sanity check it against another. The tool is deliberately simple: loan amount, rate, tenure, and the rate basis. It assumes equal monthly instalments and no separate processing fee, stamp duty, or insurance, so treat the output as the financing cost alone. Add any upfront charges your lender quotes on top.
Flat versus reducing balance on the same RM30,000
Picture a RM30,000 loan over five years. One lender quotes 6 percent flat. A second quotes 6 percent on a reducing balance. Same number, very different bill. On the flat structure the calculator multiplies RM30,000 by 6 percent by five years, giving RM9,000 of interest, so you repay RM39,000 in total. Spread over 60 months that is RM650 a month. Now switch the rate basis to reducing balance, where interest is charged only on what you still owe. The monthly instalment drops to about RM580, the total interest falls to roughly RM4,799, and you repay about RM34,799.
| Step | Flat 6 percent | Reducing 6 percent |
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That gap of roughly RM4,200 on a modest loan is the whole reason to compare structures rather than rates. The chart below puts the principal, interest, and total cost side by side so the difference is hard to ignore.
Why early settlement rarely saves what you hope
A flat-rate loan front loads the lender's profit. If you try to settle a flat loan early, the rebate on unearned interest is often calculated using a method that favours the lender, historically the Rule of 78, so paying off in year four does not refund anything close to a fifth of the original interest. A reducing-balance loan is fairer here, because you have already been chipping at the principal and the outstanding balance is genuinely lower. If you expect to clear the debt ahead of schedule, that alone can tip the decision toward a reducing-balance product even at a slightly higher quoted rate.
Two questions borrowers ask
Is personal loan interest tax deductible in Malaysia?
No. For an individual, interest on a personal loan used for living costs, a holiday, or consolidating credit card debt gives no income tax relief. The reliefs LHDN, the Inland Revenue Board of Malaysia, allows are for specific things like lifestyle spending, medical costs, and first home loan interest on a residential property, not general borrowing. Do not factor a tax saving into a personal loan decision.
How accurate is the rate I should plug in?
The 6 percent shown is just a placeholder. Personal loan pricing in Malaysia varies widely by lender, your credit record, and your income, and lenders move rates in line with Bank Negara Malaysia policy and their own risk appetite. Enter the exact rate and basis from your own letter of offer, and confirm whether that rate is flat or reducing before you compare, because the same digit means two different things.