Question 1

When to use a personal loan or a credit card?

Accepted Answer

Loans help you pay for a major purchase you’ve been putting off for some time or that once-in-a-lifetime trip you’ve been meaning to go to. It’s an additional financial line that can help you in times of special needs such as a wedding, property downpayment or emergencies like a funeral.

Credit cards, on the other hand, are often used to pay for day-to-day expenses and things you need right now, while you don’t have the funds yet. These expenses can be your weekly groceries, monthly rent, and regularly billed automatic payments, such as the Internet, mobile phone bills, electricity and water bills, and other billed subscriptions. What’s more, you can set it up in such a way that these payments are automatically made from your credit card, so all you have to do is pay one bill every month: your credit card bill.

Depending on your financing needs and costs involved, you can evaluate your situation before applying for either a personal loan or credit card.

Question 2

When to use a personal loan or cash advance?

Accepted Answer

A cash advance is a feature offered by your credit card issuer where you can opt to get instant cash from your credit limit available in your credit card and pay the amount back with an interest charge. Choosing between a personal loan or cash advance depends entirely on how desperate you need the money.

If you prefer instant cash and are willing to pay the higher interest charge (credit card interest charges range between 12%-18%), you can opt for a Cash Advance by withdrawing the amount with your credit card from any ATM nearby. However, if you have the time to spare, you can do some homework and compare the best personal loan with lower interest rates to fund your financing needs. A personal loan is typically cheaper and allows loaning larger amounts that a cash advance feature of a credit card.

Question 3

Should you borrow money from a loan shark?

Accepted Answer

Loan sharks or ‘Ah-long’ as they are popularly known amongst Malaysians, are illegal money lenders that usually target the desperate and the poor. They’re known to tempt and lull you into a sense of security by being friendly and helpful at first, offering you financial help when the banks would not accept your loan application – due to poor credit rating or if the amount requested is too low.

But the money that you borrow will come at a very high price, not to mention risk. You may think that it won’t be so bad if you’re only borrowing a small sum of money and intend to make the repayments within the shortest period of time possible, but it doesn’t work that way with these illegal money lenders.

Here is a good reason why you should not borrow from a loan shark.: Have you ever heard of the term ‘sepuluh-tiga’ or ten-three? Those who are within the inner circle of the money-lending community understand this term well, as it refers to the percentage of interest charged to the borrowers. Sepuluh-tiga interest rate means RM3 interest will be charged on every RM10 that you borrow from the money-lenders, which translates to 30% interest rate per MONTH. That’s a whopping 360% interest per annum!

To give you a clearer picture on the ridiculous sum that you’ll have to repay them, let’s say you borrow RM1,000 from the Ah-long, you’ll have to pay RM300 per month for interest alone. That means that by the end of the year you’ll be paying RM3,600 JUST for interest, and at the end of a 12-months loan tenure you’ll be paying RM4,600 to repay the RM1,000 that you loaned. Still, think it’s worth a try?

Sepuluh-tiga isn’t the only interest rate available, ridiculously high as it is. There are also sepuluh-empat (ten-four) and sepuluh-lima (ten-five) interest rates given to specific amounts of loans or borrower’s credit situation. Not forgetting the violence and harassment for not repaying your debt, things can get pretty ugly. Never, ever, do it, unless it is a literal life or death situation and you have exhausted all other available alternatives.

Question 4

How to apply for a personal loan with a bad credit score or low-income?

Accepted Answer

Depending on the banks, some are offering an instant cash option for those with income levels as low as RM1,500 without collateral or a guarantor needed. Interest rates for such products may be higher than the conventional personal loans, yet it is still a better option than borrowing from the loan sharks.

For those with a bad credit score, you can improve the approval rate of your personal loan if you can provide at least three months of income statements and the latest two years of EPF statements with sufficient funds in it. Again, do not be afraid to reach out to AKPK if you really need help in terms of legit funding options as they can help you to negotiate with banks too, depending on cases.

Question 5

What is the maximum amount of personal loan you can get at one time?

Accepted Answer

The total amount of loans (all types) issued by banks depends on your debt-income ratio and risk profile. In general rule-of-thumb, banks accept debt-income ratio below 60%. For example, Shazmi earns RM4,000 and has the monthly commitment of RM2,000, which translates into a debt-income ratio of 50%. In this case, she is eligible to apply for a personal loan if she does not have any other commitments. However, she won’t be able to borrow much as a small loan with monthly installments of RM 400 will already push her debt-income ratio to the upper limit of 60%.

Nonetheless, banks may take a stricter approach to determine an applicant’s eligibility for the personal loan. It is always good to check your credit score which may give you a clearer indication of your personal loan application’s approval rate. Always try to lower your debt-income ratio to ensure that when you really need the money, you will be approved.

Question 6

Should you use a personal loan to pay off your credit card debts?

Accepted Answer

By logic, you should do so to consolidate your debts using a personal loan with lower interest rate. However, credit cards in Malaysia offer great balance transfer deals (with 0% interest) and you should consider this rather than applying for a personal loan to minimise your cost.

Question 7

Should you use your credit card to pay off your personal loan?

Accepted Answer

It depends on the way you manage your credit card with your bank. If you have sufficient credit limit and were able to negotiate for a 12 or 24-month interest-free transfer period, you can opt to pay with your credit card for your remaining personal loan and use a cash advance. However, it is subjective to different individuals depending on their financial structure and the bank’s openness towards such a deal. Do make sure you pay off the money you owe on your balance transfer account before the grace period is over, as the interest you will have to pay on your credit card debt is likely to be (much) higher than any personal loan!

Question 8

Should I choose a personal loan or balance transfer to consolidate my debts?

Accepted Answer

In terms of debt consolidation, you will be consolidating several loans into one by applying for one personal loan. Hence, you should choose the best option that minimises your cost or else it does not make sense to consolidate your debt in the first place.

Between a personal loan and a balance transfer, the former option allows you to have the flexibility to manage the funds while the latter can only be applied to credit card debts. So you should consider your needs to make the best decision for yourself.  Just make sure you take any early settlement fees into account, when making your calculations!

Question 9

Can I transfer my loan to another bank or another person?

Accepted Answer

Transferring your loan to another bank basically is just applying for another loan to clear off the existing ones. If it turns out to be cheaper at the end of the day, you are encouraged to do so. On the other hand, a personal loan or any other loans cannot be transferred to another person because it links to your unique credit score and personal information. Just make sure you take any early settlement fees into account, when making your calculations!

Question 10

What happens if I can’t pay back my loan?

Accepted Answer

You will need to inform the bank about your problem and the bank will assist to refer your case to AKPK. The government agency will then come in to analyse your financial structure and problems and provide you with the proposed solutions to resolve your debts while taking care of daily necessities.

If it turns out to be a severe case, AKPK may take your case one step further to help you to declare bankruptcy if it comes to that. However, the agency will do their best to assist all individuals and will only resort to bankruptcy as the final option under certain circumstances.

Nonetheless, you need to know that once you have informed your bank about your inability to repay your loan, your credit score will be affected with a record and it may take a while to get back in shape till you fully clear your loan.

Till you gain the banks’ trust and confidence, you will not be able to apply for any other loans or credit cards in the near future.

Question 11

What happens to the personal loan if I die?

Accepted Answer

Usually, the guarantors will assume the responsibility for the loan. If you did not leave behind any possessions of value in your estate, creditors will have to write off the debt. In such cases, creditors cannot go after the descendants and next of kin of the deceased.

However, if there were other possessions in your estate such as house, car, cash or stocks, creditors could choose to sue your estate to claw back what is owed them which could leave nothing to your family.

Hence, it makes sense for your family to continue paying the installments on behalf of you and make claims against the estate later to prevent accrual of late payment charges, as well as prevent any delays to inherit those estates.

Despite so, this hassle can be avoided if you have insurance for your debts as your family can claim from the insurance company to repay the remaining debts without jeopardising your assets or whatever that is left to be inherited by your family.

Question 12

Can I repay my personal loan early?

Accepted Answer

Yes, you can. Most of the banks offer early settlement for free if you check clearly. However, some banks do charge early settlement fee using the ‘Rule of 78’ or concept of ‘Ibra’ for Islamic loan.

Question 13

How does AKPK work?

Accepted Answer

AKPK will develop a personalised debt repayment plan for individuals who are unable to manage their monthly repayments to banks. An individual will have a one to one session with an AKPK officer where they will calculate their financial commitments then proceed to work out a restructuring plan which will usually take between 8 to 10 years to complete.

Question 14

When is AKPK useful?

Accepted Answer

The financial advice given by AKPK is useful for anyone who is struggling to manage their debt. The debt management services that are being offered by AKPK are recommended to people who are confident they will not be able to manage and repay their debt themselves. Do not hesitate to contact AKPK and discuss your options.

Question 15

Do you qualify for AKPK?

Accepted Answer

You have to apply for AKPK before bankruptcy is filed against you. The basic requirements for you to enroll in the Debt Management Program (DMP) program are:

- Have not been declared bankrupt
- Not in an advanced stage of litigation with banks
- Debt not amounting to more than RM2 million.

Question 16

Where can you apply for AKPK?

Accepted Answer

To apply for this program, the first step is to fill up the online application form for the Debt Management Program. After which you can proceed to set up an appointment at the nearest AKPK branch to you, prepare the documents you need to bring and attend the counselling session. Do take note that AKPK does not deal with hire purchase or housing loans under the DMP and while enrolled in the program you will not be able to undertake any credit facilities from banks. AKPK has a total of 11 branches and 26 counselling offices across Malaysia, to find the nearest to you click here or you can call the AKPK Infoline at 1-800-88-2575.

Question 17

How to deal with bankruptcy?

Accepted Answer

If you have been negligent in repaying your debt, your creditors can file bankruptcy against you with the Malaysia Department of Insolvency. If the case is valid, the Director General of Insolvency (DGI) can seize your assets and sell them for proceeds to pay your creditors.

Bankruptcy is the final straw for people who cannot repay their debt. Depending on what kind of debt you have you could lose everything from your house to your car. Unless you have almost no assets of value, a bankruptcy should be avoided. Here are several ways to survive from bankruptcy.

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