When applying for a personal loan, be very clear of your goals and identify what you really want to achieve. Perhaps you want to renovate your home, or pay off your credit card bills? Always remember, a personal loan is a financial tool, not a cure-all to your financial problems. So check out the 5 things that you should know before applying for a personal loan.
1. Where should I apply for a personal loan?
There are several ways to apply for a loan; however you should always get yours from a financial or banking institution that is licensed by Bank Negara Malaysia. You must avoid borrowing from illegal moneylenders, as you may end up further in debt from their unregulated interest charges and practices.
Instead, you should always choose to use a reputable bank that offers you great service and one that can cater to your financial needs at all times.
2. How much can I borrow with a personal loan?
First, you need to learn how to calculate your debt service ratio and see whether you can afford it! Here’s how:
Total Monthly Commitments / Total Net Monthly Income X 100% = Debt Service Ratio
Ideally, you should always keep your debt service ratio below 60% to ensure you have the best chances of getting your loan approved. You should also keep in mind that banks may calculate the interest based on the total amount, the loan tenure and your credit score.
When applying for a personal loan, banks will usually agree to let you borrow up to three to four times of your monthly income to ensure you don’t overextend your finances. Most banks in Malaysia also issue personal loans at an average amount of RM20,000 – RM50,000 based on factors like the borrowers’ debt service ratio, monthly income and credit history.
3. How can I save on interest charges?
It was mentioned earlier about how the banks will calculate the interest rate on personal loans (the total amount, loan tenure and your credit score) that you need to know. So, one way is to choose a shorter loan tenure with higher monthly instalments that you can pay off quickly to save on the interest charges.
There is more to getting the best deal on your personal loan than just looking for low interest rates. For example, if the personal loan offers cash back on interest paid, this would mean that if you took a personal loan at an interest rate of 10%, a 20% cash back on interest paid would mean that you are actually repaying the bank at an interest rate of 8%!
With that in mind, make sure you check out what deals the banks have to offer, as you could save yourself hundreds of Ringgit!
4. What documents do I need for my personal loan?
The banks are required to perform their due diligence when approving personal loans, so you will need to have all your personal documents in order. This will help to prove that you can easily meet all of their requirements and cut down the back and forth between you and the bank. So here are some documents you would need to submit, and the exact list varies between banks:
- Your NRIC (MyKad)
- Your latest EPF Statement or
- Your latest 3 months’ salary slips
5. How fast can I get my personal loan approved?
The approval process is much faster these days and you can now even get your personal loan approved within 48 hours to even under an hour. Remember to bring along your MyKad and any necessary documents required by the bank to speed up the process even further!
Here at CompareHero.my, we help you find the right personal loan that suits your needs best. Click the link below and you'll see several personal loans you can choose from today:
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