Ever since we added a personal loan calculator to our site we’ve received many questions from interested readers on the topic of borrowing money. As a quick, helpful guide we’ve compiled the top five questions we've been asked and answered them for your easy reference.
I earn less than RM1500 - can I apply for a personal loan?
Personal loans for people with a monthly income less than RM1500 are very limited. We only list two and it is worth noting that these loans come tied to high interest rates. The two which allow RM1500 salary requirements are RHB’s Easy Pinjaman Express and CIMB’s Express Cash Financing. Minimum income ranges are there for a reason: to ensure you can afford to live and repay the money you have borrowed.
Do weigh your options carefully. An income less than RM1500 makes it difficult to repay after your tax and EPF deductions and budget for living necessities.
How much money can I borrow?
The amount of money a bank will allow you to borrow will depend on many things. The bank will take into consideration your salary, occupation, living expenses, and a host of other information that makes up their credit report.
The final decision rests with the bank. Although many ‘best practices’ abound, the truth remains that approval depends on how ‘attractive’ an applicant you are to the bank. You may have a large income but if you have loads of outstanding debts (such as credit cards and car loans) you might be considered a credit risk.
Remember that many banks are happier to lend money to people who are existing customers. Check the personal loan interest rates for the bank that manages your current account or savings account before you start applying to all the banks in Malaysia!
Will I get to borrow the amount of money I asked for?
Maybe, maybe not. Once again the loan amount you are approved for depends on the outcome of your credit check. Basically the bank will decide whether you are a high or low risk customer and make a loan offer based on its decision.
Let’s say Mr Lee has applied for a loan and because he has been a current account customer for ten years, the bank decides he is a low risk customer. Lee is then approved for 80% of the sum he asked for in his application. It's not 100% because he has mortgage payments to make every month.
Note that Lee will be charged stamp duty fees of about 0.5% (compulsory for all loan documentation) and any processing or administrative fees the bank may charge. Always ask the bank about any fees before applying.
If Lee was found to be a high risk customer, he might be offered a much lower amount, say 50% of the amount he wanted. Mr Lee can either agree to take the lower amount, or look elsewhere for money.
How long can I take to pay off a loan?
Bank Negara set the maximum number of years for personal loan repayment to 10 years. Many commercial banks will not allow this length of loan if they think you are a poor credit risk. The usual amount of time is between 7-8 years. However, it is always better to pay of your loan quickly if you can as personal interest rates are often quite high.
When you decide how much money you want to borrow from the bank it's a good idea to look at the amount of interest you are going to pay over the loan period. Don't make your decision based only on the amount of money you can afford to pay back every month.
Can I take out a loan to settle my existing loans or credit card debt?
Yes, you can. Though few banks offer it; consolidation personal loans exist and are there for the reason of helping you combine your debt into one payment. This frees up a larger portion of your income for everyday use and simplifies repayment.
Can I apply for a loan if I am blacklisted on CCRIS?
You can make an application but whether or not you receive the loan or not is still dependent on the bank. If you have a bad record with CCRIS, or any other credit checking agency it's very unlikely that you will be approved. In fact, applying to every bank in Malaysia for a loan might further damage your agency credit rating.
If you're in trouble with money the first thing to do is talk to the bank that you have trouble paying. They would much rather agree terms that you can manage to pay off your existing loans than to take drastic action against you. If you're staring bankruptcy in the face talk to AKPK, they can help.
Picture courtesy of nongpimmy at Freedigitalphotos.net.