# 20190211 How to choose tenure of your loan? Part 3

20190211 (Mon)

How to choose the tenure of your loan? Part 3.

Why most people do this wrongly? Paying up all the debts! Isn’t it better? This is opportunity cost. What it means is by keeping RM2,293.50 and not paying RM4,674.60, would you be better off?

That depends on how you use the extra RM2,381.10 every month. If you were to use this for gaming, enjoyment and wasting it down the drain, it will definitely be worse of. However, if you use this at your advantage:

1. Invest into another property.
2. Invest into a performing fund.
3. Invest into a business plan.

Let say every month you deposit into a mutual fund saving of RM2,293.50 at a 7.16% annualized return, how much do you have in 30 years?

{(1+i)^n} – 1 / i; i = 7.16%, n = 30 x 12 = 360, monthly interest = 7.16/1200 = 0.00597

{(1.00597)^360} -1 / 0.00597 = 1,260

RM2,293.50 x 1,260 = RM2,889,810. After 30 years your monthly investment should grow to this amount at 7.16% p.a.

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