Juggling multiple debt payments each month can feel like a chaotic circus act. From high-interest credit card bills to that lingering PTPTN loan, keeping track of it all is overwhelming. If this sounds familiar, debt consolidation using a personal loan might just be the strategic financial move you need.

It may seem odd to take on a new loan to manage old debt, but when done right, a personal loan can simplify your finances and, more importantly, save you a significant amount of money. Here’s how you can use this strategy to take control of your finances: 

The Power Of One: Key Benefits Of Debt Consolidation

So, what’s the big deal with debt consolidation? Here’s how it can work in your favour:

• Lower Interest Rates: The biggest win is slashing your interest rates. A typical credit card in Malaysia can have an interest rate of 15%-18% p.a. A suitable personal loan can offer a much lower rate, meaning more of your cash pays down the actual debt, not just the interest.
• Simplified Payments: Forget juggling multiple due dates and minimum payments. A debt consolidation personal loan combines everything into one single monthly payment. This reduces stress and the risk of incurring late fees.
• Predictable Repayments: Unlike the variable nature of credit card payments, a personal loan comes with a fixed repayment schedule and tenure. You’ll know exactly how much to pay and for how long, making budgeting a breeze.

What Exactly Are Banks Looking For When They Review My Application?

When you apply for a personal loan, banks are essentially assessing your ability and willingness to repay the loan. They focus on two main areas: your past repayment behaviour and your current financial capacity.

To begin with, your credit history is extremely important as it showcases your past repayment behaviour. Think of your credit reports as your financial report card that banks will scrutinise closely. There are two main types you need to know about in Malaysia:

• CCRIS: This report, managed by Bank Negara Malaysia (BNM), shows your repayment history for all your credit facilities (loans, credit cards, etc.) for the last 12 months. A consistent record of timely payments is what they want to see.
• Private Credit Reports: Alongside CCRIS, banks rely heavily on reports from licensed Credit Reporting Agencies (CRAs). In Malaysia, this includes agencies like CTOS Data Systems, Experian, and Credit Bureau Malaysia. These reports gather information from a wider range of public and private sources, including legal proceedings and trade references, to provide a comprehensive view of your credit health. A clean record from these agencies is just as important.

In addition to your repayment history, banks care deeply about your existing commitments including your PTPTN loan, car loan, and all credit card balances. Lenders look at all these obligations to calculate your Debt Service Ratio (DSR). This key metric measures what percentage of your income is used to service your total debts. While each bank has its own threshold, most prefer a DSR below 60-70% to ensure you have enough income left to live on and comfortably afford the new loan.

My Salary Is Just Enough To Meet The Minimum. What Else Can I Do To Look Like A Stronger Applicant?

Meeting the minimum salary is just the first step. To make your application more appealing, you need to demonstrate financial discipline and stability.

• Build a Strong Credit History: Using a credit card responsibly and paying it off in full and on time every month is one of the best ways to prove you’re a reliable borrower.

Show Stability: Banks favour applicants with a stable employment history, ideally with the same employer for at least six months. It also helps to show a pattern of saving. While not a direct factor in your loan approval, having some savings in an account, like a fixed deposit, can signal to the bank that you are financially mature and responsible.

Will Having A Credit Card And Paying It On Time Actually Help My Personal Loan Application?

Yes, it’s one of the best things you can do. A positive credit card repayment history listed on your CCRIS report is powerful proof that you can handle credit responsibly. It tells lenders you’re a lower-risk customer compared to someone with no credit history at all.

Is It Bad To Apply To Many Banks At The Same Time?

Yes, this can be detrimental. Every time you apply for a personal loan, the bank performs a “hard inquiry” on your credit report. Multiple hard inquiries within a short period can be seen as a sign of financial distress and may lower your credit score, making it even harder to get approved. The smart move is to research and shortlist the most suitable options before you apply. 

How Much Should I Ask For? Can Asking For Too Little Or Too Much Get My Application Rejected?

Getting the loan amount right is a crucial step.

• Calculate the Exact Amount: Tally up the total outstanding balances of all the high-interest debts (like your credit card balances) you intend to consolidate. You should apply for this specific amount.
• Don’t Ask for Too Much: Overestimating the amount you need can lead to rejection. Banks will assess your DSR and may deem a larger loan unaffordable for you.
• Don’t Ask for Too Little: Requesting an amount that doesn’t cover your consolidated debts defeats the purpose and can make the bank question your financial planning.

Your Path To Financial Control 

• Debt Consolidation is a Smart Strategy: Using a lower-interest personal loan to clear high-interest credit card debt is not about taking on more debt; it’s about managing existing debt more intelligently to save money.
• Your Credit Report is Your Most Important Asset: A clean CCRIS and CTOS report is the number one factor for getting your personal loan application approved. Always pay your commitments on time.
• Don’t Apply Blindly and Hurt Your Score: Applying to multiple banks is a rookie mistake. You need to do your homework first to protect your credit score.

The best way to begin your debt consolidation journey is by being informed. Use the RinggitPlus personal loan comparison tool to easily compare interest rates, monthly payments, and eligibility requirements from multiple banks in one place. We do the heavy lifting so you can find the most suitable personal loan for your needs without damaging your credit score. Make the smartest financial decision, starting today.

A Final Note: When to Seek Professional Help

While a debt consolidation loan is a powerful tool, it’s important to recognise when your financial situation might need more specialised assistance. If you are struggling to keep up with repayments and find that you may not qualify for a personal loan, please know that help is available. In such situations, we strongly encourage you to reach out to Malaysia’s Credit Counselling and Debt Management Agency, also known as ‘Agensi Kaunseling dan Pengurusan Kredit’ (AKPK), for free and professional guidance.

• TAGS:
• AKPK
• Debt Consolidation
• Personal Finance
• Personal Loan