5 Common Misconceptions About ASB FINANCING

5 common misconceptions about ASB Financing that are frequently discussed – finally answered!

Some people have doubts and claim that ASB is not Islamic, that you cannot terminate early, that there are many charges involved, high fees, and much more.

Here are the 5 misconceptions listed below:

1. ASB Loan VS ASB Financing

The differences between ASB Loan and ASB Financing:

ASB Loan	ASB Financing
Lock-in period	No lock-in period. Can terminate early
Conventional	Islamic
Penalty fees	No penalty fees

2. Conventional VS Islamic

Loan – Pinjaman (Conventional)
Financing – Pembiayaan (Islamic)

ASBF is a type of Financing and is not a Loan in the conventional sense.

The term Financing itself indicates that it is Islamic in nature and not conventional.

So before applying, you can inform the agent directly that you want to apply for Islamic ASBF.

3. What Charges Are Involved

The capital required to start ASBF, aside from the monthly instalment, includes a processing fee of RM60.

Additionally, you need to understand that the financing repayment uses the Amortisation method.

Monthly instalments are used to pay interest first, and the remainder goes towards the principal.

Principal: The amount paid to reduce the loan balance – this portion belongs to you.
Interest: This goes to the bank. Interest rates differ between banks, so you can survey and compare the rates at each bank to get the lowest one.

Here is an example of an Amortisation schedule calculated using the Financial Calculator app from the Play Store.

ASB Financing misconceptions

4. What Happens If You Cannot Pay ASB Financing Instalments?

Should a financial crisis occur and you are unable to pay the instalments.

In this case, if you default within less than a year and have arrears of up to 2 months, the bank will cancel your ASBF.

Your CCRIS report will also be affected. The bank will view such individuals as unable to manage their finances properly.

This matter requires serious attention.

However, after one year, the instalments can be covered by the dividends earned from the previous year through a rolling method.

The bank will deduct directly from the previous year''s dividends.

Personally, I recommend that before applying for ASBF, you should do your calculations beforehand.

Plan well and take up financing according to your own capability, not just following others.

5. How To Terminate ASB Financing Early?

Yes, you can terminate early.

There are no penalties imposed. Why?

Because this is Islamic Financing.

However, some may wonder whether it is possible to terminate early when the agreement states 30 years or 35 years of Financing.

The 30-year tenure is actually set to help obtain lower monthly instalments.

The longer the tenure set by the bank, the lower the monthly instalment you can get.

After termination, what do you receive?

You will receive dividends + principal + surrender value

In general, ASB Financing can be used as a tool to save for a house, and indirectly it trains you to save through forced saving.

Conclusion

Now you know the difference between a regular Loan and ASB Financing.

If you feel the monthly ASB Financing payment suits your commitments, you can read about how to calculate ASB Financing as well.

Don''t have an ASB account yet? You can open an ASB Online account.

Frequently Asked Questions (FAQ)

Is ASB Financing halal or haram?

ASB itself has been declared permissible (harus) by the National Fatwa Committee. However, the issue arises with the financing portion, as some banks use conventional loans involving interest. Muslim investors can opt for Islamic ASB Financing offered by several banks to ensure Shariah compliance.

Can ASB Financing be terminated early before maturity?

Yes, ASB Financing can be terminated at any time before the maturity date. Upon termination, you will receive accumulated dividends, principal (capital savings), and surrender value. Many people mistakenly believe that a 30-year tenure means they must wait until the end — it is actually just to reduce monthly instalments.

What is the difference between ASB Financing and a regular loan?

ASB Financing is a specialised financing facility for investing in ASB unit trusts — the loan amount is deposited directly into your ASB account. Unlike regular loans, you earn annual dividends from the investment. It functions as forced saving that compels you to save consistently.

Is ASB or stocks more profitable for investment?

ASB offers stable returns of around 4-5% per annum with near-zero risk — suitable for conservative savings. Stocks, on the other hand, offer higher potential returns (10-30%+) but with greater risk. Many savvy investors combine both for a balanced portfolio.

ASB Financing is a sound savings strategy, but if you want higher returns, stock investing on Bursa Malaysia offers broader opportunities to grow your long-term wealth.

Open a CDS account to start investing in stocks on Bursa Malaysia as a complement to your ASB savings.

Download the free stock basics ebook to learn the fundamentals of stock investing from scratch.

Further reading: