You don’t need to eat Maggi mee for breakfast or cancel your Netflix subscription to pay off debt faster. Most Malaysian borrowers can knock years off their loans just by being a bit cleverer with money they already have.

Whether you’re dealing with a personal loan, maxed-out credit cards, or car financing, paying off debt sooner saves you thousands in interest. Better still, you’ll free up your monthly budget for things you actually want to spend money on.

Why Minimum Payments Cost You A Fortune

Making minimum payments feels manageable each month. The problem is how much they actually cost you over time.

Say you’ve borrowed RM30,000 at 10% interest over five years. Your monthly payment works out to RM637. Keep paying just that amount and you’ll end up forking out RM8,242 in interest.

Add just RM200 extra each month and you’ll clear the same loan in three years and two months instead. Total interest saved: RM3,156.

Credit card debt is even worse. A RM10,000 balance at 18% interest takes over 25 years to clear with minimum payments. You’ll pay RM18,000 in interest alone. Double your minimum payment and you’re done in under four years, saving RM14,000.

Which Debt Should You Pay First?

When you’re juggling multiple debts, you need a proper plan. Two main strategies work well.

The avalanche method means listing all your debts by interest rate, highest to lowest. You keep paying the minimum on everything, then throw any extra money at the debt with the highest rate. So if you’ve got a credit card at 18% and a personal loan at 8%, your credit card gets the extra payments. Once that’s cleared, you move to the next highest rate. This saves you the most money overall.

The snowball method lists your debts by balance size instead, smallest to largest. Pay minimums on everything, then put extra money towards the smallest debt. Clear that one completely, then roll that payment into the next smallest debt. You’re not saving as much on interest, but crossing debts off your list one by one keeps you going when motivation dips.

For most Malaysians managing three or more debts, a mix of both works best. Start with credit card debt since it almost always carries the worst interest rate. Once that’s gone, you can focus on smaller loans for quick wins.

When To Make Extra Payments

Malaysian salary patterns create natural opportunities to pay down debt faster.

Making regular extra payments throughout the year works better than one big payment. Paying an extra RM100 each month saves you more interest than throwing RM1,200 at your debt in January, because you’re chipping away at the principal balance consistently.

Set up extra payments right after your salary arrives, before you have a chance to spend that money elsewhere.

If your employer pays fortnightly, try a bi-weekly payment strategy. Pay half your loan amount every two weeks instead of one monthly payment. Over a year, you’ll make 13 full payments instead of 12, shaving years off your loan term.

One warning: check your loan terms first. Some Malaysian banks charge processing fees for extra payments or limit when you can make them.

Use Your Bonuses Wisely

Malaysian workers receive several predictable windfalls each year. Using them strategically makes a real dent in your debt.

Annual bonuses are the obvious one. Direct 30% to 50% toward your highest-interest debt.

EPF dividend payments land in Account 2 each year, typically between 5% and 6%. Most people forget about this money entirely.

Income tax refunds arrive between March and June if you file through LHDN’s e-Filing system.

Festival allowances and performance bonuses throughout the year add up too.

The trick is deciding in advance how much goes to debt repayment. When your bonus hits your account, you’ll know exactly what you’re doing with it.

Should You Build Savings First?

This one confuses everyone. Should every spare ringgit go to debt repayment, or should you save some first?

A sensible middle ground works best. Start by putting aside RM3,000 to RM5,000 in a separate savings account. This stops you from reaching for credit cards when your car needs urgent repairs or someone in your family faces a medical emergency.

Once you’ve got that starter fund, throw most of your extra money at high-interest debts like credit cards and personal loans. Keep that emergency fund untouched unless genuine emergencies actually happen.

After clearing your credit cards and personal loans, build up your emergency fund to cover three to six months of expenses. Car loans and home loans at lower interest rates can continue on their normal schedule whilst you strengthen your financial cushion.

Using Financial Products Strategically

Sometimes using one financial product to eliminate another makes good sense.

Balance transfer credit cards let you move high-interest credit card debt to a new card with 0% interest for six to twelve months. Every ringgit you pay during this period goes straight to principal rather than interest. Just clear the balance before the promotional rate expires.

Debt consolidation loans combine multiple debts into one loan at a lower interest rate. If you’re juggling credit card balances at 18%, a personal loan at 15%, and hire purchase at 12%, consolidating into a single personal loan at 8% simplifies everything and cuts your total interest costs.

Your existing savings might help too. If your fixed deposit earns 3% but you’re paying 15% on a personal loan, withdrawing the FD to clear the loan makes mathematical sense. Just calculate whether you’d forfeit any interest if you’re close to maturity.

When Extra Payments Are A Waste

Not every borrower should rush to pay off debt early. Sometimes your money works harder elsewhere.

Low-interest home loans at 3% to 4% rarely justify aggressive early repayment. Spare funds often deliver better returns in unit trusts, ASNB, or even high-yield savings accounts.

Subsidised education loans like PTPTN at 1% interest cost you less than inflation. Minimum payments make more sense than early repayment, freeing your money for investments or building wealth.

Car loans near the end of their term have most interest already paid in the early years. Extra payments in the final year of a five-year car loan save minimal interest.

Before making extra payments, ask yourself: could this money work harder somewhere else? If your debt interest rate sits below 6% and you’ve cleared any high-interest debt, building investments or emergency savings might serve you better.

Your Next Move

Pick one thing from this article and do it this week. Set up an automated extra payment, mark your calendar for when your next bonus arrives, or contact your bank about balance transfer options.

You don’t need to be perfect. You just need to start. Every extra ringgit you put toward debt today stops generating interest charges tomorrow.

Want more practical money tips? Join our WhatsApp Channel for regular updates.

• TAGS:
• Debts
• How-To