Personal Loan Glossary
Accrued Interest
This is the accumulated interest you have to pay. It may be fixed or increasing over time.
Annual Fees
Annual fees are what banks charge on an annual basis for their maintenance. This is only applicable for credit lines.
Applied Interest Rate
Also known as flat interest rate, the applied interest rate is what banks in Malaysia use to calculate the monthly loan repayment. This does not include any processing and handling fees, and is used by banks to entice customers. When you compare personal loans, look at effective interest rates (EIR) instead, as this rate factors in all fees.
Balance Transfer
A balance transfer loan allows you to transfer all your outstanding debt from credit cards and other personal loans into one account. It usually charges a lower interest rate or has a grace period for 6 to 12 months.
Borrower
This refers to the person taking out a loan from a bank, financial institution or moneylender. If you take out a personal loan, you are the borrower.
Cancellation Fees
When you want to cancel your account before the agreed date with the lender, you'll have to pay a cancellation fee. This is specific to credit line loans.
Collateral
With secured loans, you have to put up assets before your loan can be approved. In the event that you cannot pay off your debt, the bank will seize these assets. This is called a collateral.
Conversion
Conversion is the act of transferring your debt to another account within the same bank.
Credit Limit
Usually applicable only to credit lines, this is the agreed amount that the lender can borrow from the bank.
Credit Line
As one of the most common personal loans in Malaysia, a credit line gives you access to cold, hard cash whenever you need it. You only pay interest on what you've borrowed.
Credit Rating
Your credit rating is the score you get as a measure to see how reliable you are as a borrower. This score is accessible by banks in your credit report, and plays a huge part in approval for a loan.
Credit Report
The credit report is a record of the borrower's entire credit history. Credit Bureau Malaysia issues this to banks whenever they enquire about a borrower to ensure that they can make good on their payments.
Default
A default is when you fail to make repayments on your loan for a few months. When you default on your loan, the bank might repossess what you have put up as collateral.
Early Redemption Charge
With term loans such as personal instalments where you have a fixed monthly repayment, you will be charged an early redemption fee if you pay off your debts before the loan tenor ends.
Effective Interest Rate
The effective interest rate (sometimes called EIR) is what you should look out for when comparing loans. This is because the EIR takes into consideration the compounding interest, processing and handling fees, which comes up to what you actually pay on your loan.
Fixed Rate Loan
This is a type of loan that charges an interest rate that doesn't fluctuate throughout the loan tenor.
Grace Period
Also known as an interest-free period, this is an allocated time period where you pay 0% on your interest. Balance transfer loans are known for their grace periods, which can go up to 12 months.
Late Payment Fees
When you miss a payment date, the lender will charge you a late payment fee.
Lender
This refers to the bank, financial institution or moneylender advancing a loan.
Loan Tenor
A loan tenor, or a loan term, is the length of time you agree to pay the loan. It can range from months to years.
Minimum Sum
This refers to the absolutely minimum you are required to pay in your monthly statement in order not to miss a repayment. This is more applicable for revolving loans than term loans.
Monthly Repayments
A monthly repayment is the sum you are required to pay the lender each month. This usually includes the interest as well.
Personal Instalment
A personal instalment is a term loan that disburses a fixed amount and has a fixed monthly repayment over a period of time.
Revolving Loan
Whenever you need money, you can borrow up to your credit limit with a revolving loan. When you've paid your monthly statement, you can borrow more. This is the opposite of a term loan.
Secured Loan
A secured loan requires a collateral before it can get approved. Because of this, secured loans usually offer lower interest rates compared to unsecured loans.
Term Loan
With a term loan, you have to make fixed monthly payments over the agreed loan tenor. This is the opposite of a revolving loan.
Total Amount Payable
When you add the interest rates, processing and handling fees on top of the amount borrowed over the loan tenor, you get the total amount payable.
Unsecured Loan
This refers to the type of loan that doesn't require collateral. Some unsecured loans are credit lines and credit cards.

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