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?

1. Emergencies

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.

2. Education

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

Loans Secured Unsecured
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
Examples
  • Mortgage loan
  • Car loan
  • Term loan
  • Personal loan
  • Overdraft
  • Credit card

 

Different Types of Unsecured Loans

Loans

Fixed Personal

Overdraft

Credit Card

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

Loans Conventional Islamic

Principles

Capitalism theory

Shariah-compliant

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

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
  • Constant over the full loan term despite market fluctuations
  • Additional fee may be charged when making additional repayments
  • Interest is calculated on the initial principal amount
Variable Rate
  • Rest rate that changes depending on the market rates
  • Could benefit when the market rates are low
  • Could end up paying more interest when the market rates are high
Effective Rate
  • Based on the remaining monthly principal amount

 

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
Last update on Jun 11, 2019