Best Low Interest Personal Loans in Malaysia 2025

An interest rate is a fee on your loan's main amount that is calculated in a percentage. It is the cost you pay for borrowing money. Almost every loan includes this charge. Islamic loans call this a profit rate instead.

These rates are also known as Annual Percentage Rate (APR). They come in two main types. A fixed rate stays the same, which is great for budgeting. A floating rate can change with the market, offering flexibility.

How do banks determine your personal loan interest rate in Malaysia?

Have you ever wondered why one person get a personal loan at a low interest rate while another is offered a much higher one? The interest rate you receive isn't random—it’s a carefully calculated figure based on several key factors. Understanding these can help you improve your financial profile and secure a better deal on your next loan.

Here’s a breakdown of the primary factors Malaysian banks consider when setting your personal loan interest rate.

1. Your Credit Score and History

This is arguably the most critical factor. Your credit score, as reported by agencies like CCRIS and CTOS, is a numerical representation of your creditworthiness. It tells lenders how responsibly you have managed past debts.

• A High Credit Score (Good Credit History): Indicates that you have a history of paying your debts on time. This makes you a low-risk borrower, and banks are more willing to offer you a lower interest rate as an incentive.
• A Low Credit Score (Poor Credit History): Suggests a history of late or missed payments, defaults, or high credit card utilization. This makes you a high-risk borrower. To compensate for this risk, banks will charge a higher interest rate, if they approve the loan at all.

2. Your Income and Debt-Service Ratio (DSR)

Your income proves you have the capacity to repay the loan, and your Debt-Service Ratio (DSR) shows how much of that income is already committed to other debts.

• Stable and Sufficient Income: Banks look for a consistent and verifiable income source that meets their minimum requirements.
• Low DSR: A low DSR means a small portion of your income is used for existing loan repayments. This signals that you have a lot of financial flexibility and can comfortably take on a new loan, making you eligible for a more competitive rate.

3. The Loan Amount and Tenure

The amount of money you borrow and the length of time you take to repay it also play a role.

• Loan Amount: Some banks offer tiered interest rates. For example, borrowing a larger sum might qualify you for a slightly lower rate compared to a smaller loan, as the bank's administrative costs become a smaller percentage of the total loan amount.
• Loan Tenure: A longer tenure means you have more time to pay back the loan, which increases the bank's risk. Consequently, longer-tenure loans often come with a higher interest rate compared to shorter-tenure ones.

4. The Bank's Standardised Base Rate (SBR)

In Malaysia, the Standardised Base Rate (SBR) is the benchmark interest rate set by Bank Negara Malaysia (BNM). It is the reference rate for all new retail floating-rate loans.

• How it Works: The interest rate you are offered is determined by the bank adding a "spread" or margin on top of the SBR. For example, if the SBR is 3.00% and the bank's spread is 2.00%, your interest rate will be 5.00%. The "spread" is what allows the bank to adjust the rate based on your individual risk profile.

5. Current Market Conditions

Broader economic factors can also influence interest rates. BNM's decisions on the Overnight Policy Rate (OPR) and changes in inflation can prompt banks to adjust their SBR and, by extension, their loan interest rates. While you can't control these factors, being aware of them helps you understand why rates might change over time.

By focusing on these five key areas, you can take control of your financial profile and position yourself to secure the lowest possible personal loan interest rate.

Which bank offer the best personal loan with a lowest interest rate in Malaysia?

Alliance Bank offers a low-interest loan starting from 4.99% p.a. with up to RM200,000 financing over loan tenures of up to 7 years.

Why do banks charge personal loans with an interest rate?

When you take out a personal loan, the interest rate is essentially the “fee” that banks charge for lending you money and taking on the risk associated with that loan. Banks are running a business, and lending money always carries some level of risk. There’s no guarantee that borrowers will repay the loan in full, or on time. This uncertainty is why banks need to charge interest—it helps cover potential losses and the costs of providing the loan service.

The exact interest rate you’re charged depends largely on your risk profile as a borrower. For example:

• If your credit history is clean, with consistent payments and a good credit score, the bank sees you as a low-risk borrower. This means you’re more likely to repay the loan on time, so the bank rewards you with a lower interest rate.
• On the other hand, if your credit report shows missed payments, defaults, or other financial “bumps,” the bank considers you a higher-risk borrower. To compensate for this added risk, you may be charged a higher interest rate.

In essence, interest rates help banks balance their risks and ensure they can continue offering loans sustainably. But before you apply for any personal loans, do your research on the actual costs beyond interest rates.

Why should I apply for a personal loans with lowest interest rate?

It’s no surprise that most people look for personal loans with the lowest possible interest rates—after all, who wants to pay more than necessary? The lower the interest rate, the less extra money you pay on top of the loan principal, meaning more of your hard-earned cash stays in your pocket.

Here are some key benefits of choosing a low-interest personal loan:

• Easier budgeting: Lower monthly repayments make it simpler to plan your finances and manage other essential expenses without stress.
• Cost savings: Over the life of the loan, paying less interest can save you a significant amount of money.
• Financial flexibility: With lower repayments, you have more freedom to allocate funds towards savings, emergencies, or other priorities.
• Peace of mind: Knowing your loan is affordable reduces financial anxiety and helps you focus on your goals.

Whether you’re consolidating multiple debts into one manageable loan, covering unexpected medical bills, funding a wedding, or paying school fees, a loan with a low interest rate can make a big difference in how comfortably you can handle your finances.

How to get a low interest rate for personal loans in Malaysia? 

As you know, there are a variety of low-interest loans in the market. You must "shop around" diligently and compare various options! Don't just grab the first offer; truly check out all the benefits and features each loan provides. Remember to always dive into the terms and conditions before you agree to anything.

Consider Secured Options With Collateral or a Guarantor

Another smart strategy to potentially secure loans with even lower interest rates is by offering some form of security to the bank. You might be able to pledge an asset, like a fixed deposit or property, which is known as collateral; this acts as a valuable backup for the bank if, for any reason, you're unable to meet your repayments. If you don't have collateral, getting a trusted guarantor to co-sign your loan agreement is another excellent option, meaning they'll step in to be responsible for repayment if you can't.

Boost Your Credit Score for Better Rates

Unfortunately, personal loans with low interest will not be given to borrowers with poor credit ratings. Therefore, take your time to improve your credit score by building a solid financial standing. A strong credit score truly opens more doors, leading to better loan opportunities and more favorable terms in the long run.

Which bank offers low interest rate on personal loans in Malaysia in 2025?

Here's a quick personal loans comparison in Malaysia offering low interest rates.

How to apply for low interest personal loans with RinggitPlus?

Compare personal loan rates and find one that suits your preference and financial background. Afterwards, you can apply online for low-interest rate loans via our RinggitPlus WhatsApp chatbot.

You can even get loan recommendations with us if you need a head start. Just click on the Apply For Loan button above!