Everything You Need To Know About Personal Loans in Malaysia - GoBear's Ultimate Guide
Getting a personal loan is an easy way to get cash that you might need in times of emergencies. In this guide, GoBear shares all the information you might need about getting a personal loan in Malaysia.
What is a Personal loan?
A personal loan means that you can borrow a sum of money and return it with interest on agreed repayment terms.
What can you use your loan for?
Personal emergencies are difficult to avoid and during those moments, not a lot of people are prepared to cover the expenses that come with it. Personal loans may help in easing the financial burden in times of trouble similar to the scenarios listed below.
Scenario 1 – Medical expenses can be unbearably high. Unless you’re insured with sufficient medical coverage, you might end up emptying your pocket due to unforeseen illnesses - just to survive on your last breath.
Scenario 2 – Everyone has their own set of problems, including your own family. Should they encounter a problem, you would certainly want to help them deal with the financial pickle they are in. A personal loan is one of your options to quickly remedy the situation.
Unless you were awarded a scholarship or a tuition fee waiver, a good education can be pretty pricey. However, a sound education is always a good investment towards a brighter future, so don’t let your golden age go to waste and consider a personal loan for the glorious returns!
3. Down payment
We may not always have enough in the account when an opportunity arises to savour the next milestone in life. Get your temporary cash flowing for your wedding, car, or property with a personal loan instead of living with regrets!
4. Transferring outstanding credit balances
There are times when the outstanding credit balance is fantastic for your existing multiple credit cards or other secured loans. When sky-high living costs are taking a toll on you, a personal loan can help maintain a healthy cash flow.
What are the loan options?
Secured loans vs. Unsecured loans
|Overview||Backed by valuable assets||Supported by own creditworthiness|
|If you fail to make repayments at agreed terms|
|Lender: Collaterals will be repossessed
Borrower: Properties will be lost
|Lender: Collaterals cannot be seized
Borrower: Credit score will be damaged
|Loan Amount||Higher Limit||Lower Limit|
|Interest Rate||Lower (Base Rate + Fixed or Variable Interest Rate)||Higher (Fixed or Variable Interest Rate)|
|Tenure||Longer (max. 35 years)||Shorter (max. 10 years)|
|Fees & Charges||Higher (legal fees, insurance, valuation fees, stamp duty)||Lower (Processing fee, stamp duty)|
|Approval Time||Longer (3 to 5 business days)||Shorter (1 to 3 business days)|
|Advantage||Easier to qualify for not-so-perfect credit profiles||More flexible and available to everyone|
|Documents||Income proof, legal docs, asset deed or titles||Income proof|
Different Types of Unsecured Loans
|Overview||Lump sum disbursement||A line of credit which allows withdrawals exceeding the deposit||A revolving loan which allows access to money up to a certain limit|
|Rates||Low (4 – 14%)||Medium (5 – 8%)||High (15 – 18%)|
|Tenure||Up to 10 years||No limit (variable)||No limit (variable)|
|Repayment||Regular instalments||Anytime, charges will accrue to outstanding||
Anytime, charges will accrue to outstanding
|Other||Useful when you know how much is needed||When in need of an emergency fund||Urgent need with the convenience|
Conventional Loans vs. Islamic Loans
|Fundamental Function||Lending money and getting it back with compounding interest||Participation in partnership acquires on behalf and before the lease|
|Rate Structure||Forefront pre-determined interest rate of returns||Risk-sharing between provider and fund user; Profit (equity growth) shared in the form of hibah|
|Profit Maximization||Unrestricted - illustrated by derivatives trading||Profit sharing subject to Shariah restrictions|
|Defaulters Charges||Penalty fee||Compensation (to charity)|
|Stamp Duty||No discount is offered||Up to 20% is allowed|
|Zakat||No deal||Collection / Payout centre|
|Eligibility||Everyone||Everyone including non-Muslims|
There’s no free lunch, what do I need to commit in return?
Getting a personal loan might sound like an easy solution, but it also entails certain commitments once your loan becomes approved. Read on to find out some important things to take note when paying off your personal loan.
Repayments are made on a monthly basis via Interbank GIRO (IBG) or Interbank Fund Transfer (IBFT) that consists of amortized loan principal amount and interest/profit charges. If you want to minimize the monthly instalment amount, you can consider the following actions:
- Decrease the loan amount
- Extend towards a longer tenure period
- Go for a lower interest rate
Types of Interest or Profit Rates
|Fixed / Flat Rate||
Fees and Charges
In addition to the monthly repayment amount, the explicit annual fee of stamp duty and processing fee should be paid upfront. Other service charges can also be applied in different conditions such as early settlement fee, late settlement fee, cancellation fee, etc.
I’m Ready To Get A Loan; What’s Next?
Now that you have taken into account all the conditions needed to get a loan, you've finally decided that it's about time to get one! It's time to start a loan application and GoBear has listed down the things you need to do to start.
Are You Eligible For A Personal Loan?
Listed below are the general requirements needed to become eligible for a personal loan. The basis of eligibility for personal loan applications is subject to the terms and conditions as specified by the financial institution you are applying for.
|Age||21 to 70 years old|
|Annual Income||RM2,000 to RM200,000|
|Citizenship||Malaysians, PR and foreigners|
|Occupation||Employed, self-employed, pensioner and civil servant|
Required Documents For Loan Application
When applying for a loan, you need to present proofs of identity and income. These requirements vary depending on your citizenship and an individual's monthly income. General requirements include the following:
Proof of Identity
|Malaysians||Photocopy of both sides of your NRIC|
|Foreigners||Employment pass or passport|
|Corporations||Copy of business registration|
Proof of Income
|Salaried||Payslip for the last 3 months, BE Form|
|Non-salaried||Monthly statements for the last 6 months, Form B|
Tips for Approval
- Get to know the usual reasons for loan rejection such as bad credit history, high commitment, short of bank’s requirements, etc.
- Check CCRIS if you are financially capable of committing to a new debt
- Compare extensively for the best loan that suits your appetite
Financial Terms You Should Know
- Accrued interest: Fixed or increasing accumulated interest
- Annual fee: Bank charges for maintenance
- Borrower: Person taking out a loan from a financial institution
- Cancellation fee: Charged when an account is cancelled before the agreed date with the lender
- Collateral: An asset that a borrower offers for the lender to secure the loan
- Credit limit: the Maximum agreed amount that the lender can borrow
- Credit score: Rating to measure the reliability of a borrower to repay the loan
- Default: Failure to make repayments for a few months
- Early settlement fee: Payable when paying off debts before the loan tenure ends
- Effective interest rate: Considers the compounding interest, processing and handling fees
- Grace period: Interest-free allocated time, normally 20 days
- Hibah: A method of possession transfer whereby an asset is given as a gift
- Riba (Interest): Unjustified increment when borrowing or lending money
- Gharar (Uncertainty): Conditions of sale that are unknown and associated with risk
- Late settlement fee: Penalty charges when a payment date is missed
- Lender: the Financial institution which advances a loan
- Maysir (Gamble): Easy acquisition of wealth by chance
- Shariah: Islamic law
- Shariah principles: Prohibition of riba, maysir and gharar
- Line of credit: Amount of credit extended to a borrower
- Processing fee: Percentage on top of the payment made
- Stamp duty: Tax levied on legal documents
- Tenure: Period of loan disbursement date to the date of the last repayment