Can You Apply for a Personal Loan If You Have Been Blacklisted?
First off, is there such a thing as a ‘blacklist’?
The ‘blacklist’ is the bogeyman to adults, especially to those who plan on getting a new loan. But is it real or just something made up to scare people into paying off their debts?
While there is not an actual ‘blacklist’ – those with bad credit are almost as good as blacklisted when it comes to applying for loans.
What is “bad” credit and why does it matter?
When you default on bank loans or don’t pay your credit card bills as they come due, it will be reported to the Credit Bureau and reflected in your CCRIS report. CCRIS is a database that stores your credit information.
Even defaulting on other commitments like utility bills may be reflected in your CTOS (private credit reporting agency) reports.
Contrary to popular belief, a CCRIS or CTOS report does not hold an opinion of your credit; it’s simply a collection of facts (if you are in arrears, how much you have borrowed, and others).
Banks however, will use the information from these reports and others, to decide whether or not to grant your financing application.
If you have defaulted on a loan from a bank it will show up on your credit report and the bank may place you on a private blacklist.
There may be other ‘blacklists’ that affect your credit as well. For instance, in 2017, the Income Tax Revenue Board was even mulling the idea of placing tax evaders on a credit blacklist.
Thus, when someone says that they are blacklisted – or assume that they are, it usually means that they have unpaid balances on bank loans and other credit.
| For more on credit scores, CCRIS and CTOS – don’t forget to check our Ultimate Guide to Credit Score in Malaysia |
How to find out if you have been blacklisted?
Rather than worry about your credit history, it's a much better idea to find out where you stand, by checking your credit report and improving your creditworthiness (if need be).
And here's the good news! It's FREE and incredibly easy to get your credit report!
Even if you aren't concerned about potentially being blacklisted, it's good practice to check your credit report before applying for a loan or credit card.
Do I have “bad” credit?
To find out about your credit status, all you have to do is check your credit report. Here’s the good news – it’s FREE! It’s a good idea to look at your credit report before applying for a loan.
You should also review your credit report every year or so, to see if there are any checks against you that may be disputed.
For instance, assume you’ve paid off your loan in full and on time, but the bank has mistakenly reported that you still owe them – this may be cause for you to file a dispute claim.
It’s important to clarify information errors as these could affect your chances of obtaining a loan in the future.
|For an in-depth look at your credit report, check out this article: How to Read Your CCRIS and CTOS Report |
Can I still apply for a personal loan if I have been ‘blacklisted’?
The short answer: Yes, you can. The thing about ‘bad credit’ is that not all banks perceive it in the same way.
Different banks have different metrics when considering someone’s credit status.
You may also be able to bolster your loan application, if you have been blacklisted, by borrowing with a guarantor or by pledging a collateral asset such as a house or a flushed FD.
But make no mistake – defaulting on loans is a serious issue and very few banks will be able to completely look past it, especially for unsecured personal loans.
Your chances of successfully securing financing are significantly lower than someone with good credit. If you are offered a loan, it may come with higher interests.
Now if you are struggling with bad credit and are unable to make good on your financial commitments, you might want to step back and evaluate your money management skills.
So…what should I do about my ‘blacklist’ status?
First thing – take a deep breath and give yourself a pat on the back for asking the question. It’s the first step toward getting off of the ‘blacklist’. Then, do this:
Pay off ALL loans
Even though you may be facing financial difficulties, to get off a blacklist or improve your credit status, you must pay back what you owe.
Start by making a plan to pay down mortgages, personal or car loans, and others within a reasonable period of time.
It's also important to make an attempt to pay off your education loans - PTPTN loans count too!
If you find that you can't afford loan instalments as they are, call your bank to discuss your repayment options.
They may or may not oblige but either way, you'll need to at least inform them of your repayment difficulties.
If you are in very heavy debt and find repayments unmanageable, contact the Credit Counselling and Debt Management Agency (AKPK) for help in sorting out your finances.
Eligible candidates may be enrolled in the Debt Management Programme by the agency and receive help to get out of debt.
They may even assist by negotiating on your behalf with banks to restructure loans you can’t afford to repay. Note that this will appear in your CCRIS report.
However, it is preferable when compared to mounting unmanageable debt and ending up bankrupt instead. And that's a very possible scenario when you aren't able to pay off your loans.
Manage your credit cards
Remember to pay your current credit card bills on time and keep balances as low as possible.
If you have more than one credit card that you aren't using, you don't have to close the account as this can improve your credit in the short term.
This is because having an unutilised (or minimally utilised) credit card adds to your available credit limit, giving your credit score a small boost.
However, you may want to rethink this strategy if your credit card charges an annual fee. It's a clear waste of money if you don't plan on using the card.
Stay on top of your finances
While your attention is focused on loans and other financing, it's also important to check that your credit isn't impacted by other unpaid bills.
If you have unpaid bills, subscription services, and gym memberships, be sure to pay it off because it could appear and remain on your CTOS report.
Furthermore, banks may also look at this, as well as other credit reports (or ratings) when evaluating your creditworthiness.
As mentioned above, when checking credit reports, make sure there aren't any discrepancies.
If one appears on your CTOS report, be sure to dispute it and clear your name.
Lastly, one oft-ignored area that could pose a bit of trouble for your credit, is dormant savings accounts.
Remember to pay maintenance fees if the account is active, allowing it to accumulate till it forms a negative balance is not a good idea.
Even this small amount can blemish your credit.
Here’s what else you can do:
- Just give it time. The longer you appear financially responsible, the better your credit will be. Moreover, any arrears (that you have paid off) will only remain on your CCRIS report for twelve months.
Be financially diligent; practice and follow these steps to improve your chances of getting a loanin the future, even if you have been blacklisted in the past.
These steps will go a long way toward improving your chances of getting a loan in the future even if you have been blacklisted in the past.
If you have bad credit and are in the market for a personal loan, we listed out the best types of loans for you here.
Best types of loans if you have been "blacklisted"
As mentioned, it can take a while to improve your credit and get off internal bank blacklists. But what happens if you are in dire need of a loan in the meantime?
You may still have financing options open to you, but know that these may be long shots and are sometimes tied to higher interest rates.
In addition, it's also not a good idea to take out another loan if you haven't cleared off previous ones.
Applications for financing or credit cards from banks would show up on your CCRIS report and could lower your credit score from other credit rating agencies.
So if it is possible, avoid applying for a new loan or credit card unless absolutely necessary.
In cases of emergencies, here are a few options:
Secured Personal Loans
With this type of financing, you would need to pledge collateral when applying.
The collateral requested for secured personal loans is typically an asset you own, such as property or a financial asset; unit trusts or bond for example.
The asset secures the loan to an extend and gives the bank a safety net when dealing with an applicant that has a marked credit history.
Thus, it might improve your chances if you have poor credit.
Low-income Personal Loans
If you happen to be earning a lower income (RM1,500 and below) and are dealing with poor credit, you might want to consider a low-income personal loan.
Since these loans still come from banks, they will perform credit checks and if your credit history appears shoddy, you will likely be rejected.
One possible way to improve your chances of securing a loan is to consider getting a guarantor or co-signer to help you.
Loans from Licensed Money Lenders
Legal money lenders like JCL could be another option for you to consider if you have poor credit. However, the reasons for your credit situation matter.
For instance, if you have defaulted on a payment in the past twelve months but have since cleared it up, you may still be eligible to apply.
On the other hand, if you have bad credit because you still owe money to a bank or other financial institutions, then you will likely be denied the loan.
A word of caution:
Even if you are desperate, avoid borrowing money from illegal money lenders or loan sharks. These unscrupulous agencies are known to harass or worse.
Borrowing against a life insurance policy
If you have a life insurance policy with a substantial cash value accumulated, you can borrow up to 90% of it.
This is a good option if you have poor credit because unlike credit checks, you'll have to go through when applying at a bank, the cash value is essentially your own.
Moreover, there is generally no interests charged, but you would forfeit the potential dividend earnings on the value built up.
You would also put yourself at risk of losing your policy (known as a 'lapse') if you don't pay back the loan and/or maintain the premiums.
Loans from Employers
If your company is gracious enough to offer financing, consider applying for a loan, as poor credit may not affect your loan application.
Company loans typically come with low or even zero-interests charged and are likely to deduct from your salary for repayment.
Depending on the company, the loan amounts can be relatively small when compared to a bank personal loan and some may not even exceed your monthly salary level.
Bank Loans for Government Employees
While loans for government employees from banks will generally still look at your credit history, it is slightly more lenient than a typical personal loan.
If you work for the government (as a civil servant, GLC employee, or orthers), you may be able to secure a special personal loan package.
These types of loans often come with lower interest and salary requirements where repayments will likely be automatically deducted via Biro Perkhidmatan Angkasa.
Check out these top-rated personal loans for government employees.
These types of loans are also for civil servants, as well as staff from selected governmental institutions and agencies.
Cooperative loans are more lenient in that they may provide financing even to those with poor credit or who are 'blacklisted' (with a Special Attention Account in CCRIS).
It may also allow a higher debt service ratio (DSR) when compared to banks.
In addition, these types of loans typically come with lower interests attached, so it is a highly attractie option for eligible government employees.
Quick tip when applying for a personal loan (with poor credit)!
Remember that you can apply to more than one bank, because even if one has rejected your application, it doesn’t mean all of them will.
And even though you may not have the prettiest credit situation, it’s still important to shop around for better rates and terms.