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Personal Loan Guide

When you need to borrow money, you approach a financial institution or moneylender to get a personal loan or a line of credit. The lender will decide the loan amount (known as the principal amount) based on your annual income.

Personal loans in Malaysia are unsecured loans, which means you don't have to put up any collateral when you borrow money. Some common uses for it include paying for your child's further education, starting a business, or paying off your existing debt.

There are many terms when you borrow money, such as interest rates, loan tenure, drawdown terms, repayment fees and any other fees and charges. These varies from lender to lender.

Generally, there are three types of personal loans that you can apply for:

  • Fast Approval
  • Sometimes emergencies happen and you need cash immediately. Whether it's an unexpected medical situation or a big down payment that can't wait, you need to find ways to make the transaction happen. Getting a fast approval personal loan can save you from the hassle of scrounging every coin in the house. With it's quick approval time, you don't need to worry about where to find the money for urgent payments.

  • Civil Servant/GLC Loans
  • Government employees, civil servants, and those who work in government-linked companies can enjoy preferential interest rates with no guarantors or collateral. You can get a loan for as little as RM2,000, and up to 35 times your monthly salary, with a maximum repayment period of 10 years. Government loans also come with Shariah-compliant variants, which are also protected by Takaful insurance. GLC loans can have fixed rate or floating rates.

  • Islamic Loans
  • As with conventional consumer loans, the borrower applies for the loan from a bank or lending agency. The bank lends them an amount of money on the promise that it will be repaid regularly within a repayment period, until the amount borrowed is repaid in full. Unlike consumer loans, however, Islamic loans will not have interest rates, or other financing fees. Instead, loans follow specific rules as stated in the bank's Shariah-compliant contracts. However, there might still be fees or charges that you can incur if you make overdue payments.

Malaysians use personal loans for various reasons. They include the following:

  • Education fees for your children
  • Medical emergencies
  • Family emergencies
  • Making a down payment for a wedding
  • Transferring outstanding credit balances for lower interest rates

In Malaysia, you are required to be at least 21 years old, but not over 60 years old, must be a Malaysia citizen or have Permanent Resident (PR) status, and earn a monthly salary of at least RM3,000.

Ensure that you have all documentation in order for a successful personal loan application. Most banks require the following:

  • Copy of your NRIC
  • Copy of latest 1 month payslip or 3 months commission slips
  • Copy of latest 3 months Bank Statement showing salary
  • Latest Form BE/EPF Statement not exceeding 12 months old

Your credit history plays a big part in your loan approval as well. You need a good credit history to show that you can repay your loan. Banks have access to it, and take this as part of their evaluation process.

  • Credit history, interest rates and loan approval
  • Before your loan application is approved, a thorough credit check is done to make sure that you are able to repay your loan. A poor credit history could lead to higher interest rates or loan rejection. You should always maintain a good credit history.

  • Additional fees and charges
  • It's important to check what the additional fees and charges that the lender imposes. The most common fees are annual fees, handling and administrative fees, repayment charges and any late payment fees.

    Because Malaysia's market is highly competitive, some lenders waive off certain charges completely, such as the annual fees.

  • Fixed Instalment Loans vs Overdrafts
  • Fixed Instalment Loans and Overdrafts are the most popular loan types in Malaysia.

    Fixed Instalment Loans are bound to a fixed instalment schedule with fixed amounts to be paid, over an agreed loan tenure. On the other hand, Overdrafts are a "safety measure" for those with credit cards or checking accounts. An overdraft protects the borrower from incurring additional fees and charges when they withdraw money beyond their current credit limit. However, overdrafts also come with their own credit limit, so people are discouraged from withdrawing over the limit multiple times.

    Keep in mind that there are serious consequences when you fail to repay your loan on time, whether or not your loan is secured or unsecured.

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