POSB iHP Care
iHP Care Calculation
Early Redemption:
For early termination of hiring for passenger cars, the balance payable upon early settlement shall be calculated with the following method:
D x B x S
Where
| |
Original loan amount |
| D: |
----------------------------------------------- |
| |
Original loan tenure in months |
| B: |
Unpaid loan tenure in months |
| S: |
1.06 (1 + 6%, where 6% comprises of a 3% prepayment fee and a 3% processing fee) |
As an illustration, where the original loan amount is $50,000 and the original loan tenure is 10 years, the balance payable upon early settlement after the payment of 36 monthly instalments would be $37,100 (round up to the nearest dollar), calculated as follows:
| |
$50,000 |
|
|
|
|
| |
(-------------------) |
x |
(120-36) |
x |
(1.06) |
| |
120 |
|
|
|
|
| = |
($416.67) |
x |
(84) |
x |
(1.06) |
| = |
$37,100.00 (Round up to the nearest dollar) |
Rule of 78 less 20% Calculation
Illustration 1
Suppose you take a loan of $50,000.00 over 10 years at a fixed interest rate of 3.50% p.a. flat add-on. The computation would be as follows:
- Total interest payable over 10 years
$50,000.00 x 3.50% x 10 years = $17,500.00
- Monthly instalment
($50,000.00 + $17,500.00) / 120 months = $563 (Round up to the nearest dollar)
Computation For Loan Redemption
Under a standard Hire Purchase car loan scheme, you are required to pay all principal and interest that would have accrued over the entire loan period. However, in the event you decide to repay the outstanding loan before the loan period ends, you will receive a rebate on the interest.
The interest rebate will be calculated by the method of Rule of 78 less 20%. This is to cover some of the costs which the bank will incur when a loan is repaid early.
Suppose your loan is $50,000.00 over 10 years at a fixed interest rate of 3.50% p.a. flat add-on. If you repay the entire loan outstanding after making 36 monthly instalments, the computation is as follows:
| Computation For Loan Redemption |
| Original Loan Amount |
$50,000.00 |
| Total Interest (based on illustration 1) |
$17,500.00 |
| Total payable (principal + interest) |
$67,500.00 |
| Less : instalment paid ($563 x 36) |
($20,268.00) |
Less : Rebate of Unearned Interest
Using Rule of 78 method (less 20%)+ |
($6,884.30) |
| Total amount payable to bank to fully redeem your loan |
$40,347.70 |
+ Formula for Rule of 78 Method (less 20%)
| |
n (n + 1) |
|
84 (84 + 1) |
|
| R = |
------------- |
x TC x 80% = |
----------------- |
x $17,500.00 x 80% = $6,884.30 |
(Round up to the nearest cent) |
| |
N (N + 1) |
|
120 (120 + 1) |
|
| Where: |
| R |
represents the interest charges rebate |
| n |
represents the balance loan period expressed in months |
| N |
represents the original loan period expressed in months |
| TC |
represents the total amount of interest payable over the loan period |