Best Personal Loans in Malaysia 2019

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Best Personal Loans in Malaysia 2019

When should you apply for a personal loan? The truth is, there is never a best time to apply for a personal loan when you are not prepared for it

In this article, you will find out the do’s and the don’ts of personal loan application based on experiences and best practices of ordinary Malaysians.

Read on to learn what a personal loan is about, how can you apply for a personal loan at the lowest rate and highest amount, and what should you do after a loan is approved or rejected.


Research stage

At this stage, you will uncover various answers to questions you might have about personal loans, and how you can use this information to make an informed decision.

How does personal loan work?

Put simply, a personal loan is a sum of money with interest lent by the bank to a borrower for a fixed period. The loan must be paid back in fixed amount installments, every month until the end of tenure.

It is quite straightforward until you come across some terms and jargons that you are not familiar with. Don’t worry, here are some commonly used terms to describe personal loans:

Terms Descriptions

Per annum (p.a.)

The interest rate will be charged on a per-year basis. If a RM10,000 loan is at 5% p.a. interest, the interest charge is RM500 per year. 


Now, if the repayment tenure is stretched to 3 years, the interest will become RM1,500 (RM500 per year x 3 years).

Principal

The amount of loan you applied for. The interest rate will be calculated based on this amount and added on top of it. Going with the example above:

Principal + Interest = Total Borrowing Amount

RM10,000 + 5% p.a. =RM10,500

Interest rate

Interest rate is charged on the loan amount by the bank to the borrowers for using its money. 


It’s the same concept as deposit; you put money in a savings or current account, the bank will pay you interest or profit for using your money.

Tenure

The loan repayment period. Choosing the right tenure is important for your personal finances.


Shorter loan period comes with higher monthly installment amount, whereas longer loan period comes with higher interest rate.

Period

Shorter

(1-3 years)

Longer 

(4-10 years)

Interest Charge

Low


RM10,000 x 5% x 1 year 

=RM500

High


RM10,000 x 5% x 10 years 

=RM5,000

Monthly Installment

High


RM10,500 ÷ 1 year 

=RM875 per month

Low


RM15,000 ÷ 10 years 

=RM125 per month

Installment

You need to pay back your personal loan every month until the end of tenure. 


Installment amount is fixed, which is calculated on the total borrowing amount then is divided by the total numbers of months.

Penalty

This is a fee a bank will charge on your overdue amount for being late on your repayment.

Default

The term to describe an event of non-payment of a personal loan for over 3 months.


In this situation, the bank will usually impose a higher finance charge and/or take a legal action against you.


Under this circumstance, you will face difficulty in securing any loans in the future as a result of poor credit score.


In fact, your repayment history will stay in CCRIS database for up to 12 months.

What type of personal loan should I apply?

Now you have caught up with some of the personal loan basics, this is the time to answer the question of preferences.

By doing a personal loan comparison, you can filter down the best personal loan to apply. The interest rate should not be the only factor when comparing personal loans, but your preferences too, such as:

What is the difference between secured and unsecured loan?

Should I get a conventional or Islamic loan?”

Do I need a Takaful or Insurance coverage?”

Secured loan vs Unsecured loan

Secured loans


  • Need collateral or security such as fixed deposit, property, unit trust, other assets
  • Guarantor is required, with or without an asset, depending on eligibility

Unsecured loans


  • No collateral or security required
  • No guarantor, except when you don’t meet the eligibility requirements
Conventional loan vs Islamic loan

Conventional loans


  • Based on the principle of moneylending, where the bank gains some profits for lending money to borrowers
  • Charge an interest rate on the total loan amount
  • Can be used for any purposes that is legal in the eyes of the law
  • Borrower bears all risks associated with the loan
  • Compound interests when payment is overdue

Islamic loans


  • Follow the Shariah contract of financing that avoids exploitative gains such as riba’ or usury
  • Charge a profit rate on the total financing amount
  • Can be used for any purposes that are permitted (halal) by the Shariah laws
  • The bank bears some of the risks to earn returns
  • Does not compound profits when payment is overdue
With Takaful or Insurance vs Without Takaful or Insurance

With Takaful or Insurance coverage


  • Optional
  • Liability coverage that helps settle all unpaid balances in the event of death or total permanent disability of the borrower
  • Slightly expensive as the coverage is added on the total borrowing amount

Without Takaful or Insurance coverage


  • Optional
  • Borrower/beneficiary is responsible to cover the unpaid balances in the event of death or total permanent disability
  • You receive 100% of the total borrowing amount

Do I need to apply for a personal loan?

Everyone has goals to achieve in their lives and a lot of times, they require money to kickstart the journey. We can gain money from any means possible such as employment, selling of products or services, own savings, as well as loans.

Some people are lucky enough to fund their goals with one or more combinations of the above methods. But, what about others who has limited options or whose limited options are not viable?

Oftentimes, they shy away from the last option, which is loan. If we look at this objectively, applying for a personal loan is practical for several reasons:

  • Education
  • Investment
  • Emergency cash
  • Funding for business
  • Buy a property (house, car, equipment etc)
  • Debt consolidation.

Personal loan for debt consolidation

When you have multiple debts of different sizes, banks, due dates, tenures and interest rates, it can be a strenuous task to keep track with the repayments.

A debt consolidation loan is great for simplifying multiple debts into a single facility. You can repay them at a lower interest rate and longer tenure to save on monthly installment and have more disposable income.

[Updated: 10th December 2019]

Top Personal Loan for Debt Consolidation

Before debt consolidation:

Debt Monthly Installment Outstanding Balance

Credit card from Bank A

RM500

RM5,000

Personal loan from Bank B

RM1,000

RM10,000

Total Commitments

RM1,500 per month

After debt consolidation:

Product

Standard Chartered Quick Cash EDGE

Interest rate

60 months: 6.99% p.a.

Tenure

60 months

Applied loan amount

RM15,000 (Outstanding balances from Bank A and Bank B)

Total interest paid

Principal amount x annual interest rate x tenure


RM15,000 x 6.99% p.a. x 5 years

= RM5,242.50

Total repayment amount

Principal amount + interest charges


RM15,000 + RM5,242.50

= RM20,242.50

Monthly Installments

Total repayment amount ÷ tenure


RM20,242.50 ÷ 60 months

= RM337.38

How much do you save after consolidating credit cards and personal loans debts into a single loan?


RM1,500 – RM337.38 = RM1,162.62 ÷ RM1,500 x 100% = 78%

 

Say you have a monthly income of RM3,500, that means you are committing 10% of your total monthly income to pay your debts.


Personal loan application journey

During a personal loan application, there are few things you need to consider such as the amount you can apply, the amount the bank can actually lend you, required documents and the places to apply for a personal loan.

How much can I borrow?

The typical loan amount you can borrow from banks is ranging from RM5,000 to RM200,000. This amount is also known as the principal amount.

Once you have decided on your principal loan amount, you need to choose a tenure that suits your financial capacity.

RinggitPlus has a calculator where you can calculate your monthly repayment easily by indicating your borrowing amount, monthly income and tenure of choice.

RinggitPlus calculator

However, this personal loan calculator does not take into account your other monthly commitments such as car loan, home loan, credit card, student loan etc, which the bank will also consider before approving your applied loan amount.

To better manage your expectations (such as high loan margin, low interest rate, fast approval), you need to check if you can afford to pay your total monthly commitments by determining your debt-service ratio (DSR).

How much can a bank loan me?

DSR is a tool to measure your available cashflow after meeting your debt obligations. Banks use this calculation to see if you have enough money to pay your monthly installment via this formula:

Total Monthly Commitments ÷ Total Monthly Income x 100% = DSR
 e.g. RM1,500 ÷ RM3,000 x 100% = 50%

There is a consensus on optimum DSR level to increase the chances of loan approval: your total monthly commitments should not exceed your total monthly income.

In the example given above, the total loan commitments are 50% of total monthly income, which means a borrower is allocating half of his/her monthly income on debt servicing alone, with little room to save, spend and invest (if any).

In this situation, the bank will usually reduce the loan amount to consequently reduce your DSR level. You can do your own DSR calculation prior to loan application to increase the chances of approval.

What documents to prepare when applying for a personal loan?

To speed up your loan application process, make sure you have compiled all of the required documents. 

The type of document will vary from bank to bank, depending on your employment type. All in all, you can find the general requirements in the table below:

Documents General Loan Application Loan Application for Salaried Individuals Loan Application for Self-employed Loan Application for Senior Citizen/Pensioner
Application Form



Valid proof of ID / Passport




.
Photo (passport size) .


.


Resident proof





Income proof - Latest 3 months salary slip
- Latest BE form with official tax receipt
- Latest 6 months
- 1 year bank statement
- Latest 3 months salary slip
- Latest BE form with official tax receipt
Latest 2 years income tax returns Pension returns or bank statement
Others . - Current working contract
- Payment track record & sanction letter (for any existing loan)
- Copy of Business Registration
- 3 Years salary statement/shop establishment
- Documents to prove office address and ownership (i.e utility bill)
.

Where can I apply for a personal loan?

Two ways you can apply for personal loans in Malaysia: offline and online.

On offline channels, you can walk into the bank’s branch of choice, speak to a loan officer, fill up the application form, present your documents and submit. Other way is by calling up the bank’s customer service contact center. 

This way, it gives you a more personalised service, although the downside is, you may not have the flexibility of time and money.

On online channels, you can compare and apply for personal loans conveniently. You can also use some of the tools to find out your credit score, calculate loan affordability, download statements and many more – all at your fingertips. 

At  RinggitPlus, we have wide range of personal loans that meet your needs with a fast and easy online loan application.


Loan approval process

There are multiple ways banks can disburse the approved loan to you. Some banks require you to open a savings account with them, whereas others will pass you the cheque or do an IBG Transfer to your designated bank account.

Bear in mind that your eligibility, credit history and credit score play major roles in determining your personal loan application approval.

Am I eligible?

To qualify for a personal loan application, you must first meet the eligibility criteria as set out by the bank, including but not limited to:

  • Nationality: Malaysian, permanent resident or foreigner
  • Age: 21 – 60 years
  • Employment type: Salaried employee (public/private sector) or Self employed
  • Income type: fixed, contract, commission basis
  • Residential status: own house, rented, living with family/relatives, company provided etc

Tips: Your lifestyle is also a contributing factor to your loan approval. If the bank spots an inconsistency in your employment histories, salary and disposable incomes, and places of residence, you may not be a favourable borrower.

What is a credit history?

A credit history shows a record of your debt repayment, which indicates your ability to commit to loan repayment.

By referencing to the Central Credit Reference Information System (CCRIS), banks can gain insight into your previous repayment habit. 

This credit report stores all your credit histories from all financial service providers in Malaysia for up to 12 months.

What is a credit score?

A credit score, on the other hand, is a 3-digit numerical rating that evaluates borrowers’ credit worthiness and is based on their credit histories.

A good credit score can increase your chances of getting a loan approved with  lower interest rates and faster loan approval

High credit score means you are favourable by the bank, whereas lower credit score means your application may not be favourable or get rejected.

Credit Rating

CTOS Data Systems Sdn Bhd (CTOS) is a privately-run credit agency that collects data from public sources and is also referenced by the banks when approving a personal loan.

Best case scenario – loan application is approved

  • 1 to 5 working days loan approval
  • Get notified by the bank upon disbursement
  • Received contract documents consist of product disclosure sheet, personal loan repayment table, and terms and conditions
  • Check bank account for money

Worst case scenario – loan application is rejected

  • Call up the bank to follow up
  • Check your repayment history (previous loan such as PTPTN) via CCRIS
  • Check your credit score via CTOS
  • Improve your creditworthiness by making prompt repayment
  • Wait for a while before applying for a new personal loan from banks
  • Explore other personal loan options and reapply

Personal Loan Interest Rates and Comparison Table

Bank Interest Rate  Minimum Monthly Income Loan Amount Borrowing Period Can Government/GLC apply?
KOWAMAS 3.99% (flat) RM1,500 RM3,000 - RM200,000 24 - 120 months Yes
RHB 4.50% p.a. (flat) RM2,000 RM2,000 - RM200,000 24 - 120 months Yes
Al Rajhi Bank 4.99% p.a. (flat) RM5,000 RM10,000 - RM150,000 24 - 96 months Yes
Affin Islamic Bank 5.50% p.a. (flat) RM2,500 RM2,500 - RM150,000 24 - 120 months Yes
Citibank 5.88% p.a. (flat) RM4,000 RM5,000 - RM150,000 24 - 60 months No
Bank Islam
5.99% - 8% p.a. (flat) RM2,000 RM10,000 - RM200,000 12 - 120 months  Yes
HSBC Amanah 6.00% p.a. (flat) RM5,000 RM6,000 - RM120,000 24 - 60 months No
KFH 6.00% p.a. (flat) RM3,000 RM5,000 - RM250,000 24 - 120 months No
CIMB 6.88% - 14.88% p.a. (flat) RM2,000 RM2,000 - RM100,000 24 - 60 months No
AEON Credit Service 7.92% p.a. (flat) RM2,000 RM1,000 - RM100,000 6 - 84 months Yes

Monthly commitment

This is the most important stage after getting your personal loan approved. Your future loan applications, especially home loan, will be greatly affected if you don’t service your current debts properly.

When is my personal loan monthly installment due date?

Your first monthly installment payment will commence one month after receiving your approved loan into your bank account.

As per your personal loan’s terms and conditions, your monthly installment due date can fall either on the first or in the middle of the month.

If, at any time of the installment period, you are not able to commit to the full amount, you can pay a minimum amount as recommended by the bank.

Doing so will save you from being penalised for late payment, however, attract finance charges between 15% - 18% p.a. on the remaining unpaid balances.

What happens if I pay my personal loan installment late?

Always strive to make full payment of your installment before or on the due date to avoid being penalised by the bank. That’s not all, your credit score will take a turn for the worse.

Generally, all banks will impose a 1% fee, whereas non-banks will charge around 8% fee, calculated daily until you pay it off. For example:

Overdue amount: RM875

Numbers of days overdue: 10

Late payment charge: 1% p.a.

RM857 x 1% x (10 ÷ 365 days) = RM0.23

In case you are on the verge of defaulting on your personal loan, you must immediately get in touch with the bank to discuss a possible recourse on your repayments.

Alternatively, you can engage Agensi Kaunseling dan Pengurusan Kredit (AKPK), a debt management program by Bank Negara Malaysia that offers free services on money management, credit counselling and debt restructuring for individuals.

Can I settle my personal loan outstanding balances off early?

You have the option to settle off your outstanding loan balances before the end of tenure, subject to terms and conditions of your personal loan.

Tips: A personal loan is usually calculated on a flat rate basis; therefore, a partial settlement is not advisable. If you have double paid your monthly installment for the month, the bank will deem it as an “Advance Payment”, which will not reduce your interest payment and the principal amount for the month.

It is important that you inform the bank in written notice prior to your personal loan early settlement. An Early Settlement fee may or may not be charged, depending on the personal loan agreement.

How to make my monthly installment payment?

You have the flexibility to make your monthly installment payment in various channels such as follows:

  • Online banking (IBFT or IBG transfer, bill payment etc)
  • Standing instruction (auto deduction)
  • Cash deposit
  • Over the counter

Tips: Earn cashback on your interest payments when you make a prompt repayment every month throughout the tenure. Check out these top personal loans with cashback program:


Financial freedom

Achieving financial freedom means you are no longer tied down with unmanageable debts. 

This comprehensive personal loan guides and tips intend to help you to make a sound financial decision and get your loan approved as you expected.

At RinggitPlus, we understand your unique needs and worries when it comes to applying for a personal loan. 

You can navigate to our other online personal loan pages that are designed to meet your income, affordability and preferences:

Compare and apply  Fast Approval loan >>

Compare and apply personal loans for  Low Income earners >>

Compare and apply for personal loans with  Low Interest Rate >>

Compare and apply personal loans for  Government/GLC employees >>

Compare and apply for Shariah compliant  Islamic loan >>

Compare and apply for a  secured loan >>