What Is Debt Consolidation? How Can It Work For You?
- By CompareHero.my
- April 20, 2021
Paying off a loan is never a fun thing to do. Pile on multiple loans and we have a headache on our hands. But don’t worry! There’s one sure way to give you the upper hand when it comes to multitasking your loan payments – a Debt Consolidation Loan.
As its name suggests, a debt consolidation loan groups together all your loan servicing under one payment. Much like refinancing, a debt consolidation loan allows you to take a step back and re-evaluate your financial commitments. Think of it as a fresh start to your monthly loan payments. It also works effectively with credit card debts.
One huge benefit to debt consolidation is a lower interest rate. We all know when debt hits us hard, it is mostly due to high-interest rates or taking on too much borrowing without factoring future financial commitments. Typically, a debt consolidation loan takes a few heavy loans or debt and combines them into one loan while extending the tenure of payment. This results in reduced interest rates. The trick, then, is to find the lowest interest rate possible.
Is a debt consolidation loan for me?
Before we move on to consider how you can benefit from a debt consolidation loan, we must look at some possibilities that should discourage you from taking one up. If you have a history of debt and are constantly in financial trouble, taking on another loan is never a good idea.
Debt consolidation also suggests that you have trouble settling loans that were granted to you. When you borrowed money and thought you could pay it back and took on more loans subsequently, this has created more debt. Now taking a debt consolidation seems like an easy way out. In some cases, you could experience a bad credit score if you take one on. But if this is your first-time doing debt consolidation and have valid reasons to take it, there should not be many adverse effects. Now that you know about the possible side effects, you may wonder how debt consolidation loans benefit you.
How does debt consolidation work?
Like any other financial instrument, we need to know how best to make use of this type of loan in any given circumstances. To do this we must understand how a debt consolidation loan works. Very simply put, if you have a couple of loans with interest, a debt consolidation loan buys over those loans.
Here’s an example:
Say you have the following and want to consolidate your debt.
- Credit card loan: RM15,000 Principle amount + 17% Interest
- Personal Loan: RM35,000 Principle amount + 15% Interest
Individually, you would be paying RM2,550 total interest for your credit card loan and RM 5,250 for your personal loan. That totals up to RM7,800.Alternatively, you can take a debt consolidation loan with a lower interest rate such as the following that combines the principle amounts of both the debts.
- Debt consolidation loan: RM50,000 Principle amount + 14% Interest
You would pay a total of RM7,000 interest. That’s a saving of RM800. This runs on the assumption that none of your instalments are paid at the time of consolidation.
Of course, this is a conservative amount that we used as an example. Most personal loans and credit cards have a much higher interest rate and most banks have tailored their debt consolidation loans significantly lower than the original interest rates.
The use of securities
Many of us have assets and liabilities but not cash-in-hand. In debt consolidation, these assets and liabilities can be used as securities (somewhat like a guarantor) when negotiating a loan.
For example, if you consolidate a hire purchase (car loan) along with your credit card debts, you can use your car as a security. The bank consolidates your asset/liability, in this situation – your car – to hold as leverage and possibly reduce the interest rate of the payment.
You can also use stocks, shares and other investments as security for debt consolidation. Although this should only be used in desperate circumstances, it is a sure way to reduce the burden of additional loan amounts.
A debt consolidation loan may seem simple in theory, but there are facets to it that we should consider seriously. It’s best to speak to a financial advisor or bank representative for a clearer, more in-depth explanation of the options available. Keep in mind that each bank can tailor their loan to your needs, so do not settle for less.
Also, consider your credit score and other factors that contribute to your financial standing before taking on another loan. Once you’ve done that, you’ve got the green light. Go ahead and browse our debt consolidation loans available.
Read More
Cara Guna Kad Kredit Yang Golongan Millenial Patut Tahu
- By CompareHero.my
- April 19, 2021
Ramai golongan millennial yang baharu sahaja mendapat kad kredit tidak mengetahui fungsi sepenuhnya, dan cara yang betul untuk menggunakan kad kredit.
Jika anda baharu sahaja mendapat kad kredit, atau anda sedang pertimbangkan untuk mendapat kad kredit, kami berikan 7 tip tentang kad kredit yang mungkin anda tidak ketahui sebelum ini.
Contents
- 1. Mata ganjaran kad kredit mempunyai tarikh luput
- 2. Bukan semua kad kredit diluar kemampuan
- 3. Kad kredit tidak sepatutnya dijadikan sebagai sumber pinjaman
- 4. Jangan benarkan orang lain gunakan kad kredit anda
- 5. Pelan ansuran kad kredit bukan bermaksud had limit anda bertambah
- 6. Bil kad kredit bukan dibayar pada akhir bulan
- 7. Tidak menggunakan kad kredit bukan bermakna anda akan mempunyai skor kredit bagus
1. Mata ganjaran kad kredit mempunyai tarikh luput
Ramai yang suka menggunakan kad kredit apabila berbelanja kerana dapat mengumpul mata ganjaran kad kredit dengan mudah. Kemudian mata ganjaran yang terkumpul itu akan digunakan untuk menebus barangan dan juga baucer. Tetapi, mungkin ramai yang tidak sedar atau lupa tarikh lupa mata ganjaran tersebut.
Oleh itu, lain kali apabila anda merancang untuk menebus mata ganjaran kad kredit, jangan lupa tentang tempoh tamat mata ganjaran tersebut. Kami cadangkan anda semak mata ganjaran setiap tahun dan menebus untuk barangan atau baucer dengan nilai tertinggi. Cara ini boleh mengurangkan pembaziran mata ganjaran kad kredit anda.
2. Bukan semua kad kredit diluar kemampuan
Walaupun beberapa kad kredit premium datang dengan yuran tahunan yang besar, terdapat banyak kad kredit yang datang dengan sifar yuran tahunan, untuk hayat! Sesetengah bank akan mengenakan beberapa keperluan untuk mengetepikan yuran tahunan seperti swipes minimum atau perbelanjaan dalam tempoh 12 bulan.
Di samping itu, anda harus mempertimbangkan yuran pembayaran lewat, faedah pemindahan baki dan caj faedah yang dikenakan sebelum memohon kad kredit. Ini adalah kos tersembunyi di sebalik kad kredit, dan semuanya berbeza. Ini merupakan sebab penting mengapa anda perlu ketahui kos yang terlibat dan lakukan perbandingan sebelum membuat sebarang keputusan.
 |
|  |
3. Kad kredit tidak sepatutnya dijadikan sebagai sumber pinjaman
Kad kredit direka untuk memberikan kemudahan dari segi pembayaran dan penjimatan tambahan melalui mata tunai atau ganjaran. Walau bagaimanapun, banyak golongan millennium mengambil kesempatan daripada ciri pendahuluan tunai dan menganggap ia sebagai pembiayaan cepat untuk selesaikan masalah kewangan mereka.
Jika anda mempunyai keperluan kewangan yang boleh ditunda untuk beberapa minggu, lebih baik anda dapatkan pinjaman peribadi. Dengan kadar faedah pada hanya antara 6% hingga 8% secara purata, anda boleh jimat lebih banyak dengan pinjaman peribadi daripada menggunakan kad kredit yang dikenakan sehingga 18% setahun.
4. Jangan benarkan orang lain gunakan kad kredit anda
Sekiranya anda masih tidak sedar, kes-kes penipuan dan kes kecurian kad kredit agak biasa pada hari-hari ini dan kadang-kadang disebabkan anda melulu. Jika anda tidak berhati-hati semasa mengendalikan kad kredit anda, sesiapa sahaja boleh mengintip cepat pada kod pin anda dan mencuri kad kredit anda selepas itu. Ya, ada langkah-langkah keselamatan yang dapat anda ambil, seperti segera menghubungi bank, tetapi masih merupakan proses yang menyakitkan.
Adakah anda tahu bahawa walaupun anda memberi persetujuan kepada rakan, keluarga atau pasangan anda untuk menggunakan kad kredit anda, anda boleh dihukum. Mereka perlu memohon kad tambahan atau kad kredit baru sendiri. Walau bagaimanapun, anda boleh membayar bagi pihak mereka dan mendapatkan bayaran daripada mereka kemudian.
5. Pelan ansuran kad kredit bukan bermaksud had limit anda bertambah
Apabila anda membeli barangan yang berharga tinggi, anda akan dikenakan harga penuh walaupun anda membayarnya dengan menggunakan pelan ansuran kad kredit anda. Maksudnya, anda sebenarnya berhutang wang bank dan membayar balik tempoh yang disepakati seperti 12 bulan. Walaupun begitu, ramai yang salah faham rancangan ini dan mengandaikan mereka masih mempunyai banyak had kredit untuk ganti kerana mereka hanya membayar sejumlah kecil setiap bulan.
Oleh itu, pada masa akan datang anda merancang untuk membuat pembelian yang besar, anda perlu mempertimbangkan batas kredit yang anda tinggalkan dan kemampuan kewangan anda untuk membiayainya setiap bulan.
6. Bil kad kredit bukan dibayar pada akhir bulan
Kad kredit mempunyai ‘kitaran bil’, yang berkisar dari 27 hingga 34 hari. Anda perlu membayar balik hutang sebelum akhir kitaran bil jika anda ingin mengelakkan caj faedah atau bayaran lewat. Walau bagaimanapun, kebanyakan anda mungkin terkejut kerana kitaran pengebilan tidak semestinya pada penghujung bulan.
Sebagai contoh, jika anda mula menggunakan kad pada 20 Oktober, dan kitaran pengebilan adalah 27 hari, bayaran mungkin akan dibuat pada 16 November bukannya akhir bulan Oktober.
Oleh itu, adalah penting untuk memegang hanya tiga kad kredit yang paling banyak – anda tidak mahu menjadi keliru antara semua kitaran pengebilan yang berlainan dan kehilangan pembayaran anda.
7. Tidak menggunakan kad kredit bukan bermakna anda akan mempunyai skor kredit bagus
Sebaliknya, memiliki kad kredit boleh membantu anda untuk mengekalkan skor kredit yang lebih baik jika anda tahu cara menggunakannya dengan betul.
Ini kerana, jika anda tidak mempunyai sejarah kredit, bank sukar untuk mengetahui kebolehan anda membayar hutang. Oleh itu, mereka mungkin menganggap ia risiko tinggi meluluskan permohonan pinjaman kepada anda dibandingkan kepada individual yang memiliki kad kredit.
Oleh itu kami cadangkan anda mohon kad kredit tanpa yuran tahunan dan gunakannya untuk perbelanjaan minimum seperti petrol atau perbelanjaan harian. Selagi anda membayar hutang kad kredit tepat pada masanya, anda akan berada di landasan yang betul untuk mencapai skor kredit cemerlang.
Kami harap anda kini mempunyai pemahaman yang lebih baik tentang bagaimana kad kredit berfungsi dan juga bagaimana untuk mengelakkan perangkap yang boleh dielaki.
Read More
Cara Buat Pinjaman Sekiranya Anda Mempunyai Rekod Kredit Buruk
- By CompareHero.my
Tidak dapat dinafikan, kad kredit dan juga pinjaman peribadi banyak membantu untuk menampung keperluan wang. Kebelakangan ini, pegawai-pegawai bank yang menawarkan permohonan dann meluluskan kad kredit boleh dilihat dimana-mana, bukan sahaja di bank. Keistimewaan seperti kelulusan yang mudah dan cepat serta cenderamata percuma disediakan untuk menarik pemohon baru.
Tetapi, bagaimana pula jika anda memiliki rekod kredit (credit score) yang buruk dan bank tidak mahu meluluskan permohonan anda? Jangan risau, masih terdapat lagi pilihan lain yang anda boleh cuba.
Contents
1. Kesatuan Kredit (Credit union)
- Kesatuan bukan-keuntungan (not-for profit) yang membantu ahli untung membuat simpanan di samping meminjam wang apabila perlu.
- Kerana ia biasanya ditubuhkan dalam kalangan komuniti (i.e.: koperasi) semua ahli saling mengenali antara satu sama lain. Lantas, ianya lebih fleksibel untuk anda memohon pinjaman berbanding bank. Salah satu kelebihan kesatuan kredit juga ialah anda boleh membuat simpanan yang lebih besar. Kadar faedah yang dikenakan juga adalah lebih berpatutan berbanding yang dikenakan oleh syarikat kad kredit.
- Kelemahan: Syarat penyertaan yang agak ketat. Seperti yang dimaklumkan, ianya ditubuhkan dalam kalangan komuniti (contoh: kesatuan pekerja), maka hanya ahli-ahli dalam kalangan komuniti itu sahaja yang boleh menyertai dan menikmati kelebihan tersebut.
2. Pinjaman habis bulan (Payday loan)
- Pinjaman ini ditawarkan dalam skala yang kecil untuk jangka masa pendek, kebiasaannya perlu dibayar semula dalam tempoh 30 hari.
- Kelebihan: Proses permohonan dan kelulusan yang mudah dan wang pinjaman juga akan dikreditkan ke akaun anda dengan cepat.
- Kelemahan: kadar faedah yang dikenakan agak tinggi, dan caj-caj tambahan yang turut dikenakan terutama sekali jika anda tidak dapat melangsaikan bayaran dalam masa sebulan.
3. Pinjaman berpenjamin (Guarantor Loan)
- Pinjaman yang ditawarkan untuk mereka yang memiliki rekod kredit ynag buruk namun mempunyai kenalan / keluarga dengan rekod kredit yang baik dan bersetuju untuk menjadi penjamin sekiranya peminjam gagal melangsaikan hutang.
- Kelebihan: Kadar pembayaran semula yang lebih rendah berbanding pinjaman habis bulan. Peluang untuk permohonan diluluskan juga lebih cerah jika rekod kredit penjamin lebih baik.
- Kelemahan: Kadar faedah yang dikenakannya masih lagi tinggi berbanding pinjaman-pinjaman lain.
4. Pinjaman kredit bercagar (secured credit loans)
- Juga dikenali sebagai bad credit loans, pinjaman ini dijamin dengan cagaran ke atas harta yang anda miliki. Sesuai untuk pinjaman jangka panjang.
- Kelebihan: Jumlah yang anda boleh pinjam adalah lebih besar, dengan tempoh pembayaran semula yang lebih panjang, menjangkau 30 tahun. Kadar faedah yang dikenakan juga kebiasaannya yang terendah berbanding semua alternatif yang dinyatakan disini.
- Kelemahan: Tidak sesuai untuk pinjaman jangka pendek. Anda juga perlu memiliki sebuah harta (kebiasaannya rumah) untuk memohon pinjaman ini. Namun ingat bahawa harta yang anda cagarkan boleh tergadai jika anda gagal melangsaikan bayaran semula. Jumlah yang anda perlu bayar juga akan berganda (ditambah dengan faedah) jika anda mengambil masa yang lama untuk melangsaikan pinjaman tersebut.
5. Kad kredit untuk rekod kredit yang kurang memuaskan
- Ini merupakan Kad kredit yang menerima pemohonan dari individu yang memiliki rekod kredit yang buruk. Biasanya ditawarkan oleh firma kad kredit dan pengeluar eksklusif.
- Kelebihan: Kadar faedah yang dikenakan adalah antara yang terendah apabila digunakan dalam jangka masa panjang, terutamanya apabila anda melangsaikan baki tertunggak tepat pada masanya.
- Kekurangan: Anda tidak boleh melangsaikan baki tertunggak kad-kad terdahulu menggunakan kad kredit ini. Anda juga tidak boleh melangkau had kredit yang ditetapkan.
Berdasarkan info-info diatas, pinjaman melalui kesatuan dan kad kredit adalah alternatif yang murah dari segi pembayaran semula dan kadar faedah. Namun harus diingat, sebelum anda bergegas untuk mengisi borang permohonan, seelok-eloknya kaji terlebih dahulu dan dapatkan info dari institusi kewangan yang menawarkan khidmat tersebut untuk membantu permohonan anda.
Read More
A Guide To The Private Retirement Scheme (PRS)
- By CompareHero.my
- April 16, 2021
A financially-secure retirement doesn’t just happen. It takes a whole lot of planning and commitment and, obviously, money.
Regardless of your age, planning for retirement is a significant part of your financial journey.
True enough, for most of us, retirement is the main reason why we start saving in the first place because when you retire, you’ll be spending your nest egg instead of building it.
And this doesn’t include other variables such as factoring in the rising cost of living, stagnant wage growth, unhealthy levels of debt per household, and unemployment issues that continue to affect Malaysians on a daily basis.
The topic makes even more sense now than ever as the number of people aged 65 years and above in Malaysia has increased steadily since the 1970s. According to the World Bank, more than 7% of the national population was 65 and above in 2020, meeting the conventional international definition of an “aging society.”
- By 2044, 14% of the population is expected to be above 65 years of age making Malaysia an “aged society.”
- Come 2056, Malaysia will be a “super-aged society,” with over 20% of its population above the age of 65.
The topic of retirement isn’t a matter to take lightly. Whether you plan to retire three years or 20 years from now, you should understand the importance of having a well-planned retirement fund for you to have a happy and financially secure future.
In Malaysia, only 60.8% of the Malaysian labor force contributes to the Employees Provident Fund (EPF), which is low when compared to high-income countries. On top of that, almost 75% of EPF members have account balances below RM250,000 at age 54, which translates to a monthly income of less than RM1,050, according to the World Bank.
Related: How To Withdraw EPF Account Savings For Personal Use?
To address the lack of retirement savings among Malaysians, the Private Retirement Scheme (PRS) was introduced in 2012 to encourage people to build a retirement fund besides EPF.
If you are curious about PRS, we are here to tell you everything there is to know about the PRS.
Contents
What is a Private Retirement Scheme?
The earlier your start saving for your retirement fund, the faster you can build up your retirement fund.
You may have heard the term “PRS” being thrown around among investors … and your parents, but what is it exactly and why does it matter for your retirement?
The Private Retirement Schemes or PRS is a voluntary long-term savings and investment scheme designed to help you save more for your retirement.
Established under the Capital Markets and Services Act (CMSA) 2007, PRS is regulated and supervised by the Securities Commission Malaysia (SC) to ensure robust regulation and supervision of the PRS industry whilst promoting trust and confidence in the PRS.
Fast facts about the Private Retirement Scheme (PRS)
- A voluntary scheme for all individuals who are 18 years old and above
- A way to boost your total retirement savings—regardless of whether you are an EPF member
- Complements your EPF savings
- Enjoy PRS personal tax relief of RM3,000 per year
- Members aged 55 or above can make a retirement withdrawal anytime, in part or in full
- Money in the PRS scheme is protected from creditors according to Section 139ZA of the Capital Markets and Services Act (CMSA)
So PRS provides all Malaysians—whether employed or self-employed to accessorise their retirement savings under a well-structured, and most importantly, regulated environment.
Seeing double? The differences between EPF and PRS
So PRS provides all Malaysians—whether employed or self-employed to accessorise their retirement savings under a well-structured, and most importantly, regulated environment.
There are some fairly obvious similarities between the PRS and EPF. First, both plans are essentially retirement schemes.
Secondly, all contributions made to both schemes are split and maintained in a 70:30 ratio into two sub-accounts: Sub-Account A and B.
| Sub-account A (70% contribution) | Amount in Sub-account A can be withdrawn upon retirement age; upon death and permanent departure from Malaysia |
| Sub-account B (30% contribution) | Amount in Sub-account B can only be withdrawn once a year |
Can your contributions be withdrawn from PRS? Yes, withdrawals from PRS or from any funds under PRS can be done partially or in full and under the following circumstances:
- After the day the member reaches retirement age, which is currently 55
- Following the death of a member
- Permanent departure of a member from Malaysia
- For pre-retirement withdrawals
While pre-retirement withdrawal may be made for any reason, a tax penalty of 8% on the withdrawal amount will be applied by the PRS providers before the balance is credited to the member’s account.
Some key differences between EPF and PRS is that the latter is a voluntary contribution scheme—so you can contribute as little or as much as you want. On top of that, PRS is privately run by financial institutions with no guaranteed returns.
This is in contrast to the government-owned EPF which gives you a guaranteed minimum dividend rate of 2.5% a year.
Related: How Much Should You Have In Savings by The Age of 30?
How does the Private Retirement Scheme work?
The Private Pension Administrator (PPA) Malaysia is the central administrator for Private Retirement Schemes in the country. (Image Source: Private Pension Administrator)
First—choose which PRS provider and its corresponding fund you want to contribute to. Feel free to choose more than one fund because you are allowed to spread out your contributions between more than one fund.
Additionally, you can contribute your funds under the (a) default option or (b) non-default option as follows:
1. Default option
Your contributions will automatically be allocated to the core fund that corresponds to the age group.
2. Non-default option
You can actively select one or more funds from the core funds or the non-core funds regardless of your age.
Regardless of the option chosen, your contributions will be maintained in two separate sub-accounts A and B as explained above.
You can choose a fund based on your risk appetite, as it will have certain levels of risk and corresponding returns.
Alternatively, you can also choose from a default option based on your age group—this is a special feature of the PRS, and aims to make investing your savings for retirement easy.
The PRS default option for core funds offers a packaged mix of underlying asset classes that provides growth, moderate and conservative risk and returns based on evolving life stages towards retirement.
Also, if you have one, you could seek advice from a financial advisor on which fund suits your situation and risk appetite the most. Either way, just make sure you do a bit of market research before making your selection.
The three core funds include the growth fund, moderate fund, and conservative fund. (Image Source: Private Pension Administrator)
Each PRS provider must offer three core funds as a default option in their PRS. Refer below to check the core funds based on your age grouping:
| Core Funds | Age | Principle |
| Growth Fund | Below 45 Years | Focus is on growing the portfolio. Aim:
|
| Moderate Fund | 45 – 54 years old | Focus is on growing the portfolio whilst seeking income. Aim:
|
| Conservative Fund | 55 years old and above | Focus is on generating income consistent with getting the portfolio ready for utilisation. Aim:
|
Source: Private Pension Administrator
Each fund provided under the PRS is intended to enhance long-term returns for members within a regulated framework.
Nominate loved ones to ensure proper heritance
Why nominate loved ones? Simply to make it easy for them to receive your gift (contributions) in the event of your passing on.
Without your nomination, your loved ones may experience difficulties when making a withdrawal from your PRS account, and this may be a lengthy process.
PRS investors are automatically enrolled as a lifetime member of the Private Pension Administrator (PPA), and are entitled to make a nomination for the purpose of easy disbursement of their PRS balance in the event of their demise.
Each member may nominate up to six persons and allocate a specified percentage of the PRS balance to be paid to the nominee(s).
Related: A Beginner’s Guide to Will Writing in Malaysia
List of PRS providers in Malaysia
 | Affin Hwang Asset Management Berhad Tel: 603 – 2116 6000 |
 | AIA Pension and Asset Management Sdn. Bhd. Hotline: 1300 22 7771 |
 | AmFunds Management Berhad Tel: 603 – 2032 2888 |
 | Tel: 1-300-88-1PRS (1777) |
 | Manulife Investment Management (M) Berhad Tel: 603 – 2719 9271 |
 | Principal Asset Management Berhad(formerly known as CIMB-Principal Asset Management Berhad) Tel: 603 – 2084 8888 |
 | Public Mutual Berhad Telefon: 603 – 2022 6800 |
 | RHB Asset Management Sdn. Bhd. Tel: 603 – 9205 8000 |
PRS fund performance
As part of your retirement planning, it’s good to cultivate a habit of keeping track of your investments and to ensure their performance is at its optimal level.
Don’t be affected if markets seem volatile in the short‐term, because saving for your retirement is a long-term endeavour. And always remember that past performance is no guarantee of future returns, so use indicators only as a guide for your own planning purposes.
Refer to the table below for a snapshot of the PRS fund performances in the year-to-date as well as over a five-year period; it’s updated on a monthly basis.
Quick View: Five-Year (5) and Year-to-Date (YTD) Performance
For a complete view of all PRS funds performance, please click here. The daily fund prices are provided by Morningstar. (Image Source: Private Pension Administrator)
Important note: The past performance of the funds are not an indication of its future performance.
How to apply for the Private Retirement Scheme?
Like what you hear? You can start saving more for your retirement by following these four simple steps:
- Select your PRS provider
- Choose a suitable fund
- Open your PRS account
- Top up your funds regularly via PRS online
Or visit their website for more information.
Disclaimer: Neither CompareHero.my nor the content on it is intended as securities brokerage, investment, tax, accounting or legal advice, as an offer or solicitation of an offer to sell or buy, or as an endorsement, recommendation or sponsorship of any company, security or fund. The content on CompareHero.my is for general information purposes only and is not intended to be personalised investment advice or a solicitation for the purchase or sale of securities.
Compargo Malaysia Sdn. Bhd. and/or its affiliates cannot and do not assess, verify or guarantee the adequacy, accuracy or completeness of any information, the suitability or profitability of any particular investment, or the potential value of any investment or informational source. CompareHero.my may receive compensation from the brands or services mentioned on this website.
Read More
6 Reasons Why You Should Never Take Loans From Loan Sharks
- By CompareHero.my
- April 15, 2021
Loan sharks or ‘Along’ 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’s why:
Contents
1. Never-ending interest charges
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 Along, 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. If you think the interest rate for sepuluh-tiga is already bad..well, we hate to think how high the interest rates can be for the other options.
Alongs are also cunning in their ‘marketing’, they have introduced the concept of daily interest on small loans – usually taken out by the poor and most desperate group of people such as laborers, farmers and even small-scale hawkers. This daily-based interest in known as ‘hari-hari’ loan among the locals, which literally translates to ‘every day’.
Borrowers are usually attracted to the ease and simplicity of the loan application process, and the fact that they don’t have to go TO the loan sharks to make their daily payments. The loan sharks employ ‘collectors’ who make daily rounds to collect the daily repayment, and whether or not you have the money to make the payment is quite another story.
The sad thing is these low-income borrowers often find themselves stuck in the never-ending interest game played by the Alongs as it drags them deeper into the pit of debt.
Related: Manage Your Debts In Malaysia For Free With AKPK
2. Hidden costs and as-you-go-along terms and conditions
Unlike the banks and other governed financial institutions, loan sharks do not necessarily have clear and detailed terms and conditions before you sign the loan agreement, simply because they can. You’re never really sure about the additional fees and charges that might incur if, say, you miss a payment. Sure, they might tell you verbally before you sign the agreement that the fees and charges are minimal. Or that if you have any problem with the repayment, you can always discuss the situation with them, and you’ll happily sign the agreement thinking that these are the nicest bunch of people you’ve ever met.
This simply couldn’t be any further from the truth. Just like banks, Alongs are known to charge penalty interest rates and surcharges if you pay late or miss a payment, except that the amounts are usually much higher than what a bank might charge. Besides, as long as the terms are not in black and white, the loan sharks can change the rules and interest rates anytime, anyhow they want.
3. Important personal possessions taken as ‘security deposit’
Your passport, bank cards, even your NRIC will often be kept by the loan sharks as a ‘security deposit’ to ensure that you will continue paying for your loan, even if this practice is illegal. This is one of the illegal safety measures taken by the loan sharks to guarantee that you won’t be running off to some other part of the country – or world – before settling your debt with them.
Your personal identification documents are yours by law, and can only be detained by the law enforcers for legal matters only. Your personal information should be protected at all costs to avoid cases such as illegal identity duplication or identity theft. Trading your passport or NRIC for a loan is NOT worth any amount of money, as they can easily abuse your personal details without you knowing it.
4. No option for full settlement
Loan sharks rarely allow you to settle your debts in full, even if you have the cash ready in your hands. This is to keep you paying the high interest that is ultimately their profit.
5. Be pressured to take another loan to pay for the other
If you give them reasons to believe that you are struggling to repay your loan, these Alongs will pressure you into taking another loan from yet another loan shark to fully repay your first loan to ‘save you from paying more interest and charges in the long run’.
Don’t be fooled, though. That is exactly how they lure you into getting entangled in a larger debt, with even higher interest.
6. Violence and harassment
When you are unable to repay your debts with the Along, it’s not uncommon for them to resort to threats and harassments that will eventually lead to violence. What’s worse, they won’t think twice about involving your family members in their coercion to force you or your family to make payments.
In January 2016, an elderly couple was harassed by loan sharks for months because of their daughter’s unsettled debt and even set fire to the couple’s house gate. Needless to say that the news shocked the entire nation.The full coverage of the story can be found here.
In a nutshell, the best way to deal with loan sharks is to not deal with them at all. Look for legal and licensed money lenders if you can’t get a loan with banks. If things have not gone that bad yet, compare the best personal loans to consolidate your debts here!
If you’re getting a loan to settle your financial problems such as credit card debts or personal loan with a bank, contact financial advisory bodies such as AKPK and get help from professionals without having to risk your – or any of your family member’s – neck.
What are your thoughts on loan sharks? Share your opinions and suggestions on why you should not take a loan with them or alternatives to loan sharks on the comment section below!
