Should you settle your PTPTN loan early?

Short answer - NO

Let's talk about debt - PTPTN loan is the only option to further my study for people who can't write proper English like me.  For the past few years, PTPTN has offered 15-20% discount for early settlement and they even advocate payment with EPF! That to me, is pushing a near-term solution at the cost of long-term social risk.

If you want to find a financially smart person that refuse to settle loans. It would be me - no shame on that.

I am comfortable with paying my student debt monthly with 1% interest.

Why? I did some reverse engineering calculation and find that it's NOT worthwhile to pay off your loan early by taking Present Value (PV) into account. PV* is what you really pay in today's term. You don't need to go thru the hassle to know that. As long as there is no deflation case, one don't pay the low interest loan first.

First, I consider the rate of inflation. While our official inflation is around 2.5-3.8%, I reckon that every urban dweller would agree that inflation is at least 5% for the past few years, if not 8%.

Taking 5% as the discount rate for a loan of RM40,000 - I would only pay RM981 extra if I drag the payment for 15 years versus paying once off. The best option to clear the loan actually happens between year 11-12 instead of the early years.  This has not even taken account of the interest earnings I could get for saving the money in a bank.

If I take 8% discount rate,  which is nearer to risk-free rate + inflation adjusted - You gain by not paying it early!

Isn't it truly a blessing to be a Malaysian? (Self-comfort of a non-Bumi aka second class citizen)

Some people think it is a burden to be in debt for education loan, but so are housing loan, car loan, medical installment or your credit card balance - in any case, I rather be holding a 1% interest rate loan!

I deal with a lot of banking officers and they think I am poor when they hear I have PTPTN debts. Poor yet I never got rejected for any loan or premier card application. I feel the winning in me all the time. It's either you get it or you don't.

How about paying with EPF? I wouldn't recommend doing that unless you are good managing your own money and somehow believe that your EPF fund will be an empty nest when you reach retirement 30 years later.

Hopefully, the plan will still be available 10 years later. As of now am committed to the turtle installment 1% interest rate plan. 

Note: Will revisit the decision if miraculously we have a deflation case.


  1. Im paying RM 310.00 for my loan. If i want to start paying RM 620.00, is it still a good decision?
    Shamini here.

    1. Dear Shamini, paying more would only make sense if:

      i. You get 10% discount and it’s the last 4 years of the loan
      ii. You can’t sleep well because of this loan.
      iii. There’s no better use for the extra money e.g. emergency savings, paying off other loans.

      Else, maintaining minimum payment is the best option.


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