Save in ASB or Settle Property Loan

This week I use my EPF to have monthly withdrawal to reduce my loan principal.

I have a question whether to use the extra fund to save in ASB or reduce my loan principal.

So which one will give me higher return?

To do the analysis I need to know what will be:

1) Effective return of saving in ASB vs reduce principal loan.
2) How long it takes to settle the loan

What I meant by Effective Return?

For me it is the amount of dividend / saving from interest that I get by year end.

Example: ASB dividend rate is 7.42% and I make a monthly saving of RM1,074 per month.

So usually, we calculate the dividend by end year we get is:

RM1,074 x 7.42% x 12 months = RM956.

But ASB will calculate based on monthly minimum amount. Based on that calculation the dividend we will get is RM519.

So effective return is RM519 / (RM1,074 x 12) = 4.03%


1) Property Loan

  • Outstanding amount as of 1st August 2018: RM48,152
  • Monthly installment: RM630.96
  • Interest rate: 4% fixed

2) ASB Dividend Calculations

  • I take only last 3 years ASB dividends from 2015 to 2017.
  • So average dividend within those 3 years: 7.42%

Analysis Results


invest in asb vs reduce housing loan principal
invest in asb vs reduce housing loan principal

Comparing the Results

  • In 1 year, ASB gives better return vs settle off my loan principal.
  • In 1 year, ASB effective return is 1.42% extra vs settle loan principal
  • 2nd year,  settle loan principal effective return is 13.34% extra vs ASB.
  • By 3rd year, settle loan principal effective return is 14.30% extra vs ASB and it gives available fund of RM25,560 as the loan is fully settled off.

Why settle off property loan gives higher effective return in the long run?

  • Interest amount over monthly installment getting less and less when the principal is reduced. This helps accelerate the principal reduction.
  • Hence, better effective return from the interest saving.


At first thought without deep analysis, I thought I want to put the money in ASB as ASB gives 7.42% dividend vs loan interest rate of 4%.

However, based on the analysis, I will pay off my loan principal instead of putting the money in. ASB.

Furthermore, by 33rd month, I have fund from monthly EPF withdrawal of RM1,074 + loan monthly installment of RM630 which I don’t need to pay anymore.

So total extra cash flow is RM1,704.



Excel analysis file Invest in ASB vs Settle of property loan