How to calculate effective interest rates across different Malaysian banks

Why Effective Interest Rate Matters in Malaysia

When comparing housing loans, many borrowers look at the advertised interest rate. But the effective lending rate (ELR) tells the real story. ELR is the actual rate you pay after a bank adds its spread on top of the Standardised Base Rate (SBR) set by Bank Negara Malaysia.

Knowing how to calculate ELR helps you compare loans across banks and avoid surprises later.

What Is the Effective Lending Rate (ELR)?

The Effective Lending Rate (ELR) is the true cost of borrowing from a bank.

Formula: ELR=SBR+Bank’s Spread\text{ELR} = \text{SBR} + \text{Bank’s Spread}

• SBR is influenced by Bank Negara’s Overnight Policy Rate (OPR).
• Spread is set by each bank and covers its operating costs and risk margin.

Step-by-Step: How to Calculate ELR

1. Check the current SBR (published by BNM).
2. Find the bank’s spread (listed in loan product disclosures).
3. Add them together → that’s your ELR.
4. Use the ELR to estimate monthly instalments.

Example:

• SBR = 3.00%
• Bank Spread = 1.50%
• ELR = 4.50%

For a RM500,000 loan over 30 years, at ELR 4.5%, the monthly repayment is ~RM2,534.

SEE MORE: Malaysia Fixed vs Variable Interest Rate Calculator

Comparing ELRs Across Major Malaysian Banks

Bank	SBR (%)	Spread (%)	ELR (%)	Monthly (RM500k, 30 yrs)
Bank A	3.00	1.50	4.50	RM2,534
Bank B	3.00	1.70	4.70	RM2,590
Bank C	3.00	1.90	4.90	RM2,645

Even a 0.4% difference in ELR can cost over RM40,000 extra interest across the loan tenure.

Why Compare ELR Instead of Advertised Rates?

• Advertised rates can be teaser offers for a short period.
• ELR includes the bank’s spread and reflects the true cost.
• ELR lets you compare loans fairly across Maybank, CIMB, Public Bank, RHB, HSBC, and others.

For example, two banks might both advertise “from 3.8%,” but if one has a higher spread, the ELR ends up costlier.

Visualizing the Impact of ELR Differences

Imagine a RM500,000 loan for 30 years:

• At 4.5% ELR: Total repayment = ~RM912,000
• At 4.9% ELR: Total repayment = ~RM952,000

That’s RM40,000 more, just from a 0.4% rate difference.

FAQs About Effective Interest Rates in Malaysia

1. What is the effective lending rate (ELR)?
It’s the actual rate you pay, calculated as SBR + bank’s spread.

2. How is ELR different from flat or advertised rates?
Flat/nominal rates don’t show the real cost. ELR reflects the true repayment obligation.

3. Does the ELR change with OPR?
Yes. When Bank Negara adjusts the OPR, the SBR changes, which affects ELR.

4. Where can I find each bank’s spread?
Banks must publish spreads in their loan product disclosure sheets.

5. Which Malaysian bank has the lowest ELR in 2025?
It changes depending on promotions and spreads — always compare across banks.