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Message: <blockquote data-quote="EL118" data-source="post: 542102" data-attributes="member: 22940">Hi bro, there is flaw in your calculations to come to the "profit" of 21k. u have missed out the important "mthly instalment payment" that keep reducing your loan amount, which is why the effective interest rate will almost double that of the "flat" rate. This concept is important and is where the bank make the profit. many banks or credit card also use this technique to "mislead" card user for "cheap" personal loan of 7% flat which in effect is almost close to 14% effective. (next time anybody receive phone calls from banks offering low interest loan, just ask them how much is the effective interest rate before deciding)the housing mortgage loan interest will be the "effective interest". if you can get BLR - 2% (BLR @ 6.6), then the effective interest rate is 6.6-2 = 4.6%. because it is based on daily rest. i.e the interest is calculated based on reducing principal amount (after monthly instalment payment)  instead of original loan amount throughout the tenure like the HP.These may sound like intimidating, but once u understand them is very effective in your financial planning and "capital allocation" decision between keeping FD, property investment or share investment etc.</blockquote>