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Fun Posts

I am sometimes think that I am very good at one thing – which is “hot-hot chicken shit”. I will push hard on doing certain things, and when I felt bored, I will just let it go! It is amazing to be honest that I can do such things. There has been so many instances in life that I continue to do it, and there will be a time when I want to dive into the thing again, and I will get back to it. Haih. Sometimes it does cost me a lot of money.

pexels-photo-842554.jpegHonestly – I do have a lot of things in my mind. In fact there are problems in life that I have and I continuously  push it aside by putting on a different focus. Well it does work. Just that when I start to be excited about certain things – I just go all the way. So far – I have not had such episode, but I need to manage it. Maybe because lately I’ve been enjoying the work that I do thus the focus has been about work.

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I do what to get back to photography – but I am delaying it because I don’t spend too much money if I cannot decide to commit to it. Yes I do have an excellent camera but to be able to do some great photography – I need one with an interchangeable lens. I know I will fall back to a street photography which is what my current camera is for, but there are times when you wish you have a better camera. But lets see. I do have time.

Some of my neglected interest is sketching. I do like sketching to be honest, but because of my failing eyesight, I tend to just put it aside because its very hard for me to draw without wearing reading glasses (yes I do have one).

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Details details!

With my new job – I guess I do have a lot of time with me now. Yes – a lot of time. In the past couple of weeks, I’ve been catching up with a lot of my old colleagues and friends. Some are because they asking me for advice and some is just a catchup.. gossip and such. It has been great. But I need to find some sort of a pace in which I have a good balance of what I want to do.

There are few things on my head now:

  1. I want to write more (on this blog of course).
  2. I want to draw (yes yes)
  3. I want to read – and finish off my book on banking
  4. I want to run more (yes I do run at times when my feet doesn’t kill me)
  5. I want to play more golf (time to get back to the greens!)

See there are so many things. Writing, reading and draw can be done at any time. I can do it before I go to sleep whilst run and golf will need to be a bit more planning because I need to bring my set and stuffs to work. The good things is of course run and golf place that I go to – I can charge my car (yes I do have a plug in hybrid).

I haven’t got time to blog about that, but I will certainly do that. Now its the second week that I am using the car. A lot of the issues has been resolved but I certainly still getting use to the car.

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I need to write more. Seriously. Its more fun to write, it some sort of meditating to be honest.

Rule of 78

Learning

According to LoanStreet – The Rule of 78 is one of the most prevalent secrets in the banking industry that is barely understood by the public. This post is about me trying to understand how it works, and hoping to share with you so that you understand and be able to figure out how you can apply it to your financial decision.

Since I got to banking I am in a learning mode. Learning how the banking system work. Being a self-professed technical person, I will try to understand things in a more technical way. Whether for good or bad.

The situation now is that I am buying a new car and deciding how many years should I take up the loan. And since I am not yet eligible for staff loan yet, I need to resort to a conventional loan from other local banks that offer Hire Purchase. So in order to calculate this – I need to understand how the settlement works. Well – fact of the matter the settlement is done by returning back to you the interest that was charge. Do understand that for typical hire purchase here is the formula:

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So what this mean is that the interest are charge up front when you take the loan,

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Question is now, when you terminate your loan, how do you calculate the interest that will be returned? Well – generally its calculated by “Rule of 78”. What this rule essentially says, the borrower will be paying greater part of the interest during the initial part of the loan. I.e, more interest are apportion during the first year versus in the later years. Note that this is different from the “Daily Rest” or “Monthly Rest” types loan in which the interest are always calculated based on the outstanding balance prorated to the period.

Example “Daily Rest”, the interest rate is divided by 365 days and then applied daily based on the outstanding amount that the borrower has. This should be better because as one pay earlier, the outstanding amount will be less and therefore the knocking off the principal amount is faster. Note that when you pay, interest will be the first to be paid before the principal. Principal is the original loan amount. So if one is smart, you will be able to “game the system” and able to pay less interest if you know when to pay your loan.

Back to Rule of 78. So the question is how do you calculate the weightage? Lets take an example above, 5 years loan. A lender would make a sum of all the months:

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So basically what happened is this, the way the interest is calculated is in reverse. I.e. interest for the first month is based on the assumptions above:

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Which make it quite interesting because if the weightage of the interest is fair, then the total interest that will be refunded will be a lot less if you were to settle earlier.

So what I did in order to calculate how long is my loan duration is for me to plot a table of the settlement price versus the depreciation of the car and eye ball for a sweet point in which I am willing to sell off the car. I will explain that in another post. But I hope you do get what I mean by Rule of 78.

You may think that this may not seem fair for the borrower, but you need to understand that for a bank, each of the loan has a lot of cost thats associated to it. From creating the infrastructure to manage the balances to hiring sales people to push the loans. And thus they need to be able to make money out of the lending that they do to their customers.

I hope the post is somewhat beneficial. Remember please do read the terms and conditions of your hire purchase or loans and see if Rule of 78 applies. They may not say specifically that they use Rule of 78, but you can see that the calculation is similar.

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Taken from here  Maybank. Link may not work… 🙂

Note; I am not a financial advisor therefore I am not responsible for any inaccuracy of the information posted here. Please do your own research and consult professionals if you need any advice regarding your financials. I wrote this post to poke my readers curious minds 🙂