What is an interest rate?
Almost every loan – car loan, home loan, business loan and personal loan – charges an interest rate (or ‘profit rate’ if it is an Islamic loan).
An interest rate is calculated in the form of percentage and charged to your principal loan amount.
Interest can be calculated on a fixed rate or floating rate basis.
Some people prefer the former as it will help them budget their monthly expenses, whereas the latter is usually favourable for those earning variable incomes.
Which personal loan in Malaysia has the lowest interest rate?
The personal loan with the lowest interest rate in Malaysia is Bank Rakyat personal loan with a 4.63% interest rate.
Tenure is 1 year, the loan amount is from RM5,000 to RM100,000 and the minimum income per month is RM800.
| Bank | Interest/Profit Rate (p.a.) | Minimum Income |
Loan Amount | Loan Tenure (year) |
|---|---|---|---|---|
| Ringgitplus.com | ||||
| Alliance Bank CashFirst Personal Loan | 5.33% p.a. | RM3,000 | RM5,000 – RM150,000 | 7 years |
Why banks charge interest on personal loans?
Money lending is a risky business because there is no guarantee you can get the money back on time and in full.
Banks will usually charge interest as a “fee” for doing business with you and assuming the risk of default.
A personal loan interest rate can be high or low depending on the risk profile of a borrower.
If you have a poor credit history, you may be charged a higher interest rate compared to those with a good credit rating because you are considered as high-risk borrowers.
What factors driving people to apply for low interest personal loans?
Most people will go after low interest personal loans because it is manageable. In truth, nobody likes to pay interest – so anything close to zero interest rate is very exciting for borrowers.
A low interest personal loan gives you room to plan your budget and expenses. You could be looking into consolidating all debts with a low interest loan, or financing funeral expenses, footing large medical bills, paying for wedding expenses or school fees.
How to get a low interest personal loan?
As you know that there are a variety of low interest personal loans in the market, it is important that you shop around for the benefits and features that you want.
You must also watch out for the product fine prints before agreeing on anything.
Another way to secure for low interest personal loans is by pledging an asset to your loan.
This collateral will be used to cover for the remaining loan outstanding in case you are no longer able to meet your repayment.
If you don’t have collateral, you can get a guarantor to co-sign your loan agreement, who will then be responsible for the repayment.
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.
Low interest rate personal loan in 2020
Promotions are usually short-lived and come with hassling terms and conditions. Despite that, you will have the opportunity to manage your finances better.
5 Banks With Low Interest Rate Personal Loans |
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|---|---|---|---|---|
| Bank | Interest/Profit Rate (p.a.) | Min Income (per month) | Loan Amount | Tenure (year) |
| Al Rajhi Bank | 4.99% interest rate | RM5,000 | RM10,000 – RM150,000 | 8 years |
| Alliance Bank | 5.33% interest rate | RM3,000 | RM5,000 – RM150,000 | 7 years |
| Bank Islam |
4.20% interest rate | RM2,000 | RM10,000 – RM300,000 | 10 years |
| Citibank | 5.88% interest rate | RM4,000 | RM5,000 – RM150,000 | 5 years |
| HSBC Amanah | 6.00% interest rate | RM5,000 | RM6,000 – RM150,000 | 5 years |