Applying for a personal loan can be a straightforward process, but getting approved depends on several key factors. In Malaysia, banks and lenders assess your ability to repay and your financial reliability. Understanding what lenders look for and preparing your application carefully can significantly increase your chances of approval. This guide will walk you through the essential steps to strengthen your personal loan application in Malaysia.

What Exactly Are Banks Looking For When Reviewing Your Application?

When you apply for a personal loan, banks evaluate your financial health to decide if you can repay the money. They are primarily looking for your ability and willingness to pay back the loan. This includes checking your age and income, reviewing any existing debts you have, and seeing how you have managed credit in the past. Common reasons for personal loan rejection in Malaysia include a lower credit score, substantial existing debt, an unstable income, or not meeting basic age or income eligibility. By understanding these factors, you can take steps to present a strong application.

1. How Important Is Your CCRIS And CTOS Report, Really?

Your credit score is an important number that shows lenders how reliable you are as a borrower. It is a reflection of your past borrowing and repayment activities. In Malaysia, your credit report includes information from sources like the Central Credit Reference Information System (CCRIS) and CTOS Data Systems Sdn Bhd. Banks rely on these reports heavily to understand your credit behavior.

To build or improve your credit:

• Pay your bills on time: This includes credit cards, utility bills, and other existing loans. Consistent on-time payments are a positive signal.
• Keep credit card balances at a low level: Try to use only a small portion of your available credit limit. Maxing out credit cards can affect your score negatively.
• Avoid too many new credit applications: Each new application can temporarily affect your score. Only apply for credit when genuinely needed.
• Start building credit early: If you have no credit history, consider getting a credit card with a modest limit and using it responsibly. Having a credit card and paying it on time can certainly help your personal loan application by demonstrating responsible credit management.

It is also crucial that you have not been declared bankrupt. A bankruptcy declaration is a serious factor that would typically lead to personal loan rejection. Review your own credit report from CCRIS or CTOS before applying for a personal loan. This allows you to check for any errors and address them beforehand.

2. Do Banks Care About Your PTPTN Loan Or Other Commitments?

Yes, banks absolutely care about your PTPTN loan and any other financial commitments you have. Your Debt Service Ratio (DSR) is a percentage that compares your total monthly debt payments to your net monthly income. Banks in Malaysia use DSR to assess your ability to manage additional debt. All your existing loan commitments, including housing loans, car loans, credit card debts, and education loans like PTPTN, are factored into your DSR calculation. A reduced DSR shows lenders that you have more disposable income available to cover new loan repayments.

To calculate your DSR, divide your total monthly debt obligations by your net monthly income (income after EPF, SOCSO, and tax). Many banks in Malaysia prefer a DSR below 60%, with some aiming for below 40% for larger loans.

Here is how to improve your DSR:

• Reduce existing debt: Focus on paying off smaller loans or credit card balances.
• Increase your income: Explore ways to boost your net monthly income.
• Consider debt consolidation: Combining multiple high-interest debts into a single, personal loan with a more favorable interest rate can reduce your overall monthly commitments and improve your DSR.

You can use our DSR calculator to estimate your ratio and understand how a new personal loan might affect it.

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

Lenders look for consistent income and employment stability as strong indicators of your ability to repay a personal loan. Even if your salary just meets the minimum requirements, you can strengthen your application by focusing on other aspects of your financial profile.

• Stable Employment: Banks prefer to see a steady employment history, ideally with the same employer for a significant period (e.g., at least 6 months to 1 year). Frequent job changes might raise concerns.
• Sufficient Income: Banks have minimum income requirements for personal loans. Your income should be adequate to comfortably cover your living expenses and all your monthly debt repayments, including the new loan.
• Proof of Income: Be ready to provide clear and recent proof of income. This typically includes your latest 3 to 6 months of salary slips, bank statements showing salary credits, and recent EPF statements or tax forms (like Form B/BE).

For self-employed individuals in Malaysia, providing detailed financial statements, tax returns, and business records for at least two years is often important. Demonstrating consistent income and business growth can significantly strengthen your application. Beyond income, maintaining a strong credit score (as discussed in Section 1) and managing your DSR effectively (as discussed in Section 2) are crucial ways to demonstrate your financial health to lenders.

4. What Documents Do You Need For A Personal Loan Application?

An incomplete or incorrect application package is a common reason for personal loan delays or rejections in Malaysia. Banks require specific documents to verify your identity, income, and financial standing. Ensuring all required documents are complete and accurate is vital.

Common documents required in Malaysia include:

• Copy of your NRIC (both front and back).
• Latest salary slips (typically 3 to 6 months).
• Latest bank statements (showing salary credits, usually 3 to 6 months).
• Latest EPF statement.
• Latest income tax forms (e.g., Form B/BE) with official tax payment receipts.
• For self-employed: Business registration documents, latest company bank statements, and tax returns.

Always create a checklist of all required documents based on the specific lender’s requirements. Ensure all documents are recent, clearly readable, and correctly formatted. Submitting an organised and complete application helps lenders process your personal loan with greater efficiency.

5. How Much Should You Ask For? Can Asking For Too Little Or Too Much Get Rejected?

The amount of personal loan you apply for and the repayment period you choose also impact approval. Yes, asking for too little or too much can affect your application outcome.

• Affordable Loan Amount: While you might be eligible for a certain amount, it is wise to only borrow what you truly need and can comfortably afford to repay each month. Asking for an amount that appears disproportionately small compared to your income might sometimes raise questions, though it is less common than asking for too much.
• Loan Tenure: The repayment period affects your monthly payments and total interest paid. A shorter tenure means higher monthly payments but less total interest. A longer tenure means lower monthly payments but more total interest. Choose a tenure that results in a monthly payment you can easily manage without financial strain.

Banks assess whether the requested loan amount and tenure fit within their risk appetite for your financial profile. Applying for an amount that stretches your finances too much can lead to rejection. Using a personal loan calculator can help you determine a realistic monthly repayment amount based on different loan amounts and tenures.

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

Applying to many banks at the same time for a personal loan can potentially affect your credit score negatively. Each new credit application typically results in a “hard inquiry” on your credit report. A large number of hard inquiries in a short period can suggest to lenders that you are desperate for credit or are taking on too much debt, which can lower your credit score.

Instead of applying to multiple banks simultaneously, it is advisable to:

• Research and compare offers from different lenders using online comparison platforms like RinggitPlus.
• Apply only to the bank or institution that appears to be the best fit for your profile and needs.
• If your first application is rejected, understand the reason before applying elsewhere. This allows you to address any underlying issues first.

7. Does Your Relationship With The Bank Matter?

Sometimes, your existing relationship with a bank in Malaysia can positively influence your personal loan application.

If you have a savings account, fixed deposit, or other banking products with a particular bank and have maintained them well, it might give you an advantage. A history of prompt repayments on other credit facilities with that bank (like credit cards or existing loans) also shows them you are a good paymaster. While not a guaranteed approval, a positive banking relationship can contribute to a smoother application process for your personal loan.

Final Steps To Get Approved

Getting your personal loan approved involves careful preparation and understanding what lenders value in Malaysia. By focusing on your credit score, managing your Debt Service Ratio, ensuring stable employment, preparing accurate documents, and borrowing responsibly, you significantly increase your chances of success.

Remember, each bank has its own specific criteria. If one bank rejects your application, do not be discouraged. Use platforms like RinggitPlus to compare various personal loan options from different lenders across Malaysia. Our tools can help you find a personal loan that suits your financial profile and increases your likelihood of approval.

• TAGS:
• Credit Score
• How-To
• Personal Loan