Guide for Personal Loan in Malaysia
In our lifetime as Malaysians, chances are we’ll apply for a personal loan at some point; whether to finance the purchase of a car, to go to university, or to consolidate existing loans. However, you can’t just apply for a loan whenever you feel like it, there are factors to consider and steps to take before you jump into obtaining a loan.
Once you get your hands on your loan (figuratively), it becomes a responsibility, so take the time to plan and research. Here’s a comprehensive guide for your personal loan application in Malaysia to help you with the process.
Should You Take a Loan?
Ask yourself what is the purpose of your loan, do you need a car so you can get to work? Is there an emergency you can’t afford to cover right now? Keep in mind a personal loan is not as simple as “I need RM 10,000, the bank lends it to me, I return RM 10,000 when I have it.”
There are loans extended for a defined term that needs to be paid off within a set timeframe, and of course a loan is not as simple as funds borrowed with no strings attached, it comes with charges and sometimes, high interest rates.
If possible, do calculations to make sure you will be able to repay regularly and avoid falling into debt.
How Does Your Credit Score Factor into Your Loan Process?
In short, the higher your credit score is, the more affordable the loan rates banks will offer you. Of course, you will only have a credit score if you’ve applied for a loan before or if you have a credit card that you use.
You can get a credit report from Credit Reporting Agencies like CTOS who take into consideration whether you paid previous loans on time, if you have missed payments, how much you currently owe banks, your credit history length among others to give you a score.
With a good credit score, banks will likely see you as a low-risk borrower and won’t see the need to impose high interest rates to protect themselves.
Upon checking your credit history, you’ll get a fair idea of what kind of loans you’re qualified for. It is also handy to shop for the most favourable loan by comparing offers from different banks, most importantly the interest rates applied, loan term, and total cost of the loan.
A personal loan is a debt. A failure to repay a debt will incur penalties, especially unsecured debts which do not have a collateral in case of a default. Not only would there be charges for late payments, some loan agreements would charge you if you pay earlier than the expected date, if it comes with a fixed interest rate.
As stated previously, your credit score affects the terms of the loan offered to you, but the loan you’re taking will in turn affect your credit score. While you may be able to get favourable loan terms now, should you struggle to repay this particular loan, you risk jeopardising your future credit prospects. That is why it is important to make sure that you actually do need the loan, and plan accordingly to prepare a repayment method.
When you’ve settled on a loan offer with your preferred interest rates, rather than celebrate and sign off immediately, it would be a smart move to look out for hidden charges.
A personal loan should only be secured to help you, but can lead to a whole lot of trouble if you’re not smart with financial planning.
Interest rate isn’t the only thing you should be thinking about, loan tenure is equally important.
A longer loan tenure usually means you pay back in smaller amounts each month, but usually even if you had extra income down the road and wanted to pay off the loan earlier, you can’t without incurring a penalty. Most lenders also enforce the Rule of 78 when it comes to loan interest calculation.
This means the borrower will have to pay a greater portion of the interest owed in the earlier part of the loan tenure, decreasing any potential savings you may make by paying off the debt early.
On the flip side, overconfidence in your ability to pay back the loan in a short tenure without proper planning or a good source of income can cause you to be unable to meet the payments.
To prevent these situations, pick out the right loan tenure that you feel comfortable with. Again, careful research helps in a lot of these situations.
Aside from your credit score, a number of factors come into consideration when banks approve loans. Your annual income, age, nationality, employment status and sector also matter. Some loans are exclusively for salaried employees, while some others give civil servants priority approval.
Be sure that you’re qualified for a loan before applying, as a rejection might cause other banks to be hesitant when approving a loan for you.
Need Financing? Try IBPO i-Personal Financing
Sure, you can do it the old fashioned way and enquire from different banks what their rates are, and go through their qualification processes. Alternatively, why not look for experienced middlemen to match you with the best loan deal for you, and fast track your loan approval?
As official partners of reputable banks, we at IBPO Group Berhad have access to loan deals with exclusively low interest rates. Better yet, we help you pre-qualify for any potential loans you can get. Our advisors will help you all through the process, so you don’t have to personally go from bank to bank only to get rejected.
On top of that, we have adopted CTOS’s eKYC Customer Verification System to smoothen the application process. eKYC can verify your identity within the space of a couple of minutes without you needing to go anywhere.
All you need to do is fill up and submit a form containing your basic information, take snaps of your NRIC, and a quick selfie of yourself. Should everything add up, you’re verified!