Compare Personal Loans In Malaysia Like A Pro

As you sit on a lumpy sofa in the middle of your living room, listening to water pour from a leaky roof as the rain hits relentlessly on your window glass, you may be considering a makeover for your life. . It’s no surprise that most of us find ourselves strapped for cash and feel stuck in a financial rut – unable to move forward.

It is not impossible to have a financial overhaul when you feel stuck. There are many financial products that can give us a boost in the right direction. If these products are used to our advantage, we can end up improving our finances and our lives.

One of these products is personal loans. It is one of the easiest credit facilities that an individual can contract because it does not require any collateral. In fact, you can get a personal loan application in Malaysia approved in 10 minutes.

However, just because it’s easy to obtain doesn’t mean everyone should get one. It’s a credit facility that comes with interest after all.

Personal finance can be used for debt consolidation, or to pay off education or training costs, home renovations, auto financing, medical bills, and other emergency expenses.

Whether it is a good or a bad decision lies in its purpose. Getting a personal loan for a vacation or to buy a new TV is definitely not a good idea. However, getting a personal loan to finance home improvement, which will increase the value of your home, is not a bad idea.

However, the use of any credit facility must be accompanied by serious considerations on all factors. You wouldn’t want to find yourself in dire financial straits when you are unable to pay your monthly repayment.

Here are the main factors that you need to look out for when looking for a personal loan in Malaysia:

1. Attractive financing rates

Whenever you get a credit facility, the most important factor to consider is the finance rate. While this is an important factor, it is not the only factor you should consider.

This is why comparing the personal loan plans available in the market is crucial when looking for a personal loan. A package that allows you to lower the financing rate as needed gives you the ability to get a cheaper loan.

Alliance Bank CashFirst personal loan

Alliance Bank CashFirst personal loan

Interest rates start at 3.99% pa

Get RM108 Touch ‘n Go eWallet credit when approved. Plus, get a chance to win a Macbook Air or Apple AirPods.

Since a personal loan is approved on the basis of your creditworthiness, which includes your income and your credit history, it is important to make sure that your credit report is in top condition.

Here’s how much you could save on finance costs with a lower finance rate:

Bank X
Bank Y
Flat rate financing
4.95%
13.75%
Effective funding rate
9.22%
21.00%
Amount of the loan
30,000 RM
30,000 RM
term of the loan
3 years
3 years
Monthly repayment
RM958
RM1,130.25
Total interest over the term of the loan
RM4,488
10,689 RM

Based on the table above, you save RM6,201 in finance charges when you opt for a lower finance rate. That’s a lot of money to save in three years!

2. Longer loan term

The length of time you can take out the loan can affect your monthly repayment and the overall cost of your loan. The longer your loan, the lower your monthly repayment will be, but the higher your financing costs will be.

For some banks, the finance rate also increases with the length of your loan, which means the longer your term, the higher your finance rate.

Based on the decision of Bank Negara Malaysia, the maximum loan term for personal finance in Malaysia is 10 years. However, many banks only offer a maximum loan term of five years.

If you are looking to borrow a large amount and are unable to commit to a large monthly repayment each month, it makes sense to go for a longer loan term. Although the finance charge can be quite high, it’s always better than not paying off your loan, which can have very bad consequences for your finances in the future.

Here’s how a different loan term can affect your repayment:

3-year term
10 years of seniority
Flat rate financing
4.95%
5.44%
Effective funding rate
9.22%
9.37%
Amount of the loan
30,000 RM
30,000 RM
term of the loan
3 years
3 years
Monthly repayment
RM958
RM386
Total interest over the term of the loan
RM4,488
RM16,320

By opting for a shorter occupancy period, you are potentially eligible for a lower financing rate, compared to the maximum tenure period of 10 years. However, you can see a marked difference in the monthly repayment amount – at RM572 per month! If you are really strapped for cash each month, it makes sense to go for a longer term so that you can effectively manage your monthly repayment.

As you can see, the total interest is very different for the two terms. For the 3 year personal loan, you only incur a cost of RM 4,488 for the loan, while the cost of the 10 year loan is RM16,320!

There are pros and cons to a short and low tenure for a personal loan. As a general rule, it always makes more financial sense to choose the lower term, however, only if you are able to commit to the higher monthly repayment.

3. Minimum requirements

Once you have compared the above factors, you would have selected a few personal loans that match your criteria. The next step is really important to make sure that your request is not rejected by the bank.

You must meet the bank’s minimum application requirements. The more flexible the requirements, the better, as your chances of getting approved are higher.

If you are in the low income group, you need to be thorough when evaluating the personal loan products in the market. Some banks require a minimum income of RM3,000 from their personal loan applicants.

One of the lowest income requirements in the market is RM 1,000 for permanent employment and RM 8,000 for contract employment. However, the low income group has a higher funding rate than the others.

There are many personal loans that only allow applicants aged 21 and over. This makes many aspiring personal loan borrowers truly ineligible.

The majority of personal finance products in Malaysia are only open to Malaysian citizens.

It is important to make sure that you meet all the requirements set out by the bank before you apply to avoid being rejected. The rejected request will be recorded on your credit report, which will lower your credit score. A bad credit history can affect your future credit applications.

As with any credit facility, you should do your homework thoroughly before deciding to apply for one. First of all, you need to look at your financial situation and see if you can afford a loan before shopping for a personal loan.

Once you’ve done that, you need to compare all the personal loan products on the market and find the one that suits your purpose and costs the least.

Whether you need money to renovate your home to increase the value of your property or to finance your higher education, these factors in choosing a personal loan remain the same. s

If you’ve taken all of the factors into account, getting a personal loan can be a good financial decision that can put your finances in order.

This article was first published in 2016 and has been updated for freshness, accuracy and completeness.

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