Personal loans are money you can borrow from a financial institution which you are required to pay back within a predetermined period. A personal loan has 3 main components: loan amount, loan period and loan interest rate. Typically, people apply for personal loans for a variety of personal reasons such as to pay off education fees, mortgages, wedding expenses, settle personal debts or anything really – as long as it’s not for business purposes.
There are two types of personal loans in Malaysia:
Secured personal loans:
These personal loans are backed with a guarantor or collateral in the form of fixed deposit account, property or unit trusts attached. This is to serve as another layer of security should the loan applicant fail to make repayments. In such circumstances, the bank has the right to seize the collateral or shift responsibility of repayment to the guarantor. Secured personal loans cater to applicants who do not have a good credit history, but it can also be used to secure lower interest rates on personal loans.
Unsecured personal loans:
A more common type of personal loans which do not require the applicant to pledge any collateral or guarantor. Unsecured personal loans are generally for people who need cash in advance and urgently. Therefore, the application and approval process for unsecured personal loans is generally faster. While it’s convenient, unsecured personal loans come with higher interest rates.
Which One is the Best Personal Loan for Me?
It really depends on where you stand financially and how urgent you need the cash. If you are in need of emergency cash to foot a huge unforeseen bill and you are confident that you’re able to pay it back in the next couple of years, an unsecured personal loan is your best bet.
But if it’s to purchase something you can’t afford, taking a personal loan is not only unwise but rather irresponsible.
Apart from personal loans, there are other categories of loans you can apply for if you want to make a big purchase such as a house or car. This way, you don’t have to dig deep into your savings, which can be used for more fruitful investments.
Things to Look Out for When Applying for a Personal Loan
All the financial terms and jargon can be intimidating and often overwhelming. Let us help you with some or a few common personal loan terms which could get you some relevant and important information.
Here are some commonly used terms in personal loans:
- Per annum (p.a.) – The amount of interest rate you will be charged per year for the duration of your loan. For example a RM10,000 loan at 11% p.a. stretched out over five years will amount to RM5,500 in interest charges. This means you will have to pay back RM15,500 in the course of five years. The longer it takes to settle your loan, the more you will have to pay.
- Principal – The initial amount of money that you loaned. Going by the same example above, the principal amount would be RM10,000.
- Tenure – The period of time you are expected to pay back your loan in full. The longer your tenure, the more interest you have to pay.
- Installment – The amount you have to pay each month. This is calculated based on the principal plus interest divided by the number of months in your tenure.
- Default – In banking terms, it means that a person has failed to pay their monthly installments. This is a scenario we want to avoid.
- Penalties – In the event that you are unable to make your monthly installments, you will be penalized with additional charges. Most banks apply a 1% penalty but always check beforehand!
How to Apply for a Personal Loan in Malaysia
It’s always a relief when there’s emergency cash whenever a large unexpected bill comes in. Hence banks are realising the needs for having competitive interest rates, fast approval loans with minimal paperwork required to speed up your personal loan application process.
If you are planning to apply for a personal loan in Malaysia, here are a few things that will help you to compare and apply for some of the best personal loans Malaysia have to offer.
Personal Loans Application procedure:
There are various options available when applying for a personal loan but the method may differ from bank to bank.
Walk-in – If you prefer face-to-face interaction, you can simply walk into the bank and ask about personal loan applications. Do remember to bring along your MyKad and income slip. Banks usually offer customers with fast approval personal loans that require little documentation for your convenience sake.
Phone-in – Some banks provide personal loan application via phone banking. In the phone call, you will be given a set of easy instructions to follow on how to go about your application. The bank would then email or mail you (your preference) the application form along with the request for copies of required documents needed for the personal loan application.
Online application – You can apply here on Ringgitplus and let us do all the work for you.
Preparing Your Documents
It is always best to be prepared to avoid making multiple trips to the bank or having the personal loan application unnecessarily delayed. Here’s a list of the usual documents required by banks:
1) Copy of NRIC (and the original to present if applying in person) – Arguably the most important document that you need for any bank applications. A passport is also acceptable if you are a non-Malaysian resident.
2) Proof of Income: Some banks require just one type but there are others that will require a combination of 2-3 types if not all, so do call your bank to find out. When in doubt, it’s always best to reach out and prepare as many as you can!
- Salary slip: Depending on how much you are planning to take, your bank would require between 2-6 months of salary slips, or an employer confirmation letter should you be unable to provide your salary slips.
- Credit card/Bank statement: This is so that the bank can assess your credit history to determine whether you can afford to repay your loan. This, along with salary slips are key documents in an unsecured personal loan application.
- EPF statement: Your EPF statement can be used to show your employment history and proof of income.
- EA Form: This annual statement is provided by your employer and contains important information about your salary (including bonus and incentives). Your income tax Form B can be used if you are self-employed and run your own business(es).
There are multiple ways your approved loan will be disbursed to you. Some banks may require that you open a savings account with them (if you don’t already have one). While some banks will pass you a cheque or do an interbank Giro transfer.
How long is the wait? Some banks offer on-the-spot disbursement, while other banks promise a same-day disbursement. However, most banks can take anywhere between 1-14 working days.
Don’t be disheartened when your personal loan application is rejected. There are plenty of other banks offering personal loans with competitive rates. Apply for a few other banks when you’re starting on your personal loan applications!
5 Questions to Ask Yourself Before Applying for a Personal Loan
Personal loans are a good way to get quick cash for whatever you may need it for. But for many, the need may come urgently where they are too hurried to pay much attention to the terms and conditions.
The good thing about personal loan products is that they are almost similar in features. Before signing the Letter of Offer, make sure you ask yourself and the bank five salient questions about the personal loan which you are about to commit.
#1: Is a personal loan necessary?
First, ask yourself if you really need to apply for a personal loan? As they come with several fees and charges, on top of high-interest rates, consider if there is another option besides a personal loan at present. Can you use your savings? Is it possible to pay with a credit card? Would a credit card balance transfer help?
If you have truly exhausted every possible option to obtain fast cash other than a personal loan, then you will need to consider the technicalities of a personal loan once you get down to it.
#2: Do I need security/particular relationship with the bank to qualify?
Depending on the loan products with the bank in question. Some easy personal loans require a fixed deposit, investment fund or unit trust as collateral, while some only need a guarantor. You may also come across other prerequisites such as lower income, low-interest rate, and fast approval. There are also loans for civil servants or government-linked company workers.
Take your time and do your research to find the best personal loan for you.
#3: How much interest will I be paying?
Anyone applying for a personal loan is usually for a longer period of time and thus, it will be important to consider how much interest you will be paying for the duration of the loan.
Unlike credit card interest charges, personal loan interest rates are always set against the principal amount – that means the rate is fixed for every year of the loan tenure. So the longer the tenure, the more you interest you’ll end up paying.
New Bank Negara guidelines have reduced tenures of personal loan financing to a maximum of 10 years. However, most loans to non-government sector employees are not affected as tenures are usually capped at 7-8 years. Even at this number, the level of interest paid for a 6-year loan can be extremely high.
Here’s an example of a loan amount of RM10,000 with a 9% p.a. the interest rate with varying tenures:
Rate: 9% p.a.
Loan amount: RM10,000
Monthly repayment amount
Total interest paid
Since the interest charge is calculated based on the principal amount, you will be charged the same amount of interest every year no matter how much of the principal you’ve repaid. As illustrated above, the interest charged on a six-year tenure for a RM10,000 loan is more than half the borrowed amount – even though the monthly repayment between 4 and 6-year tenures differ by only a small amount.
When doing a personal loan comparison, you can make your life easier by using a personal loan calculator to see the final amount to be paid. There are many personal loan calculators in Malaysia that you can find online, including ours in our Personal Loans page. You simply need to input your monthly income and the amount you wish to borrow – we’ll do the rest and show you all personal loans that you can apply for, and what’s their individual interest rates.
Even the best personal loan rates will rack up a large amount if you opt for a long tenure. Keep this in mind the next time you are considering a personal loan!
#4: How much should I repay every month?
Looking at the interest charged above, if you can afford to repay your loan quickly, it would be highly recommended to do so. Consider all commitments and find a figure you’d be comfortable with. However, if the minimum is all you can afford to repay, it will be inevitable to choose the longer repayment schedule: paying more interest but with a lower risk of default.
#5: What other fees and charges will I incur?
Many are shocked to find that the disbursed loan amount is lower than what they had applied for after deducting the bank’s “fees and charges”. If you were to apply for a loan at exactly the amount you need, the shortfall may cause some inconvenience. There may also be penalties for early settlement or late payment. Some banks even require that you take out Takaful insurance on the loan and this will cost you a tiny bit more every month. Always check the bank terms for one or more of these most common fees and charges:
- Processing fee
- Stamp duty
- Early termination fee
- A late payment penalty fee
- Insurance fees
Personal loans can become an even bigger burden than any other loan product because of late payment fees and high-interest rates. Always consider these four vital points before signing on the dotted line.
Compare The Best Personal Loans in Malaysia in 2019
RinggitPlus helps you compare the personal loans in the easiest way. Furthermore, you can also apply for your desired personal loan online without paying any administration fee - in short, your application is free!
Top 10 Personal Loans in Malaysia:
- Citibank Personal Loan (Interest rate from 5.88%, financing up to RM150k, tenure up to 5 years, minimum income RM4,000/month)
- Alliance Bank CashFirst Personal Loan (Interest rate from 3.88%, financing up to RM200k, tenure up to 7 years, minimum income RM3,000/month)
- RHB Easy-Pinjaman Ekspres (Interest rate from 8.31%, financing up to RM150k, tenure up to 7 years, minimum income RM1,500/month)
- KFH Murabahah Personal Financing-I (Profit rate from 6%, financing up to RM250k, tenure up to 10 years, minimum income RM3,000/month)
- UOB Personal Loan (Interest rate from 5.99%, financing up to RM100k, tenure up to 5 years, minimum income RM2,000/month)
- Al Rajhi Personal Financing-I (Profit rate from 4.99%, financing up to RM150k, tenure up to 8 years, minimum income RM5,000/month)
- AEON ICASH Personal Financing (Profit rate from 7.92%, financing up to RM100k, tenure up to 7 years, minimum income RM1,500/month)
- CIMB Cash Plus (Interest rate from 6.88%, financing up to RM100k, tenure up to 5 years, minimum income RM2,000/month)
- HSBC Amanah Personal Financing-I (Profit rate from 6.88%, financing up to RM150k, tenure up to 7 years, minimum income RM3,000/month)
- Alliance Bank CashVantage Personal Financing-I (Profit rate from 3.88%, financing up to RM200k, tenure up to 7 years, minimum income RM3,000/month)
Frequently asked questions about Personal Loan:
1. Can I apply for a personal loan if my salary is less than RM1500 a month?
There aren’t many personal loan options for those earning less than RM1500 a month. In addition, they are usually tied to high-interest rates. Minimum income ranges are there for a good reason: to ensure you repay the money you have borrowed.
One way to see if the bank will approve your application is to weigh in your options carefully as a monthly income of less than RM1500 makes it difficult for you to meet your monthly installment payment and budget for living necessities.
2. How much money can I borrow?
There are many factors that will influence the amount of money a bank will allow you to borrow. The bank will take into consideration your salary, occupation, living expenses, and a host of other information that makes up their credit report.
After all, your personal loan approval depends on how ‘attractive’ an applicant you are to the bank. You may have a large income but if you have loads of outstanding debts (such as credit cards and car loans) you might be considered a credit risk. Conversely, having a personal loan may also affect an upcoming home loan application.
Remember that many banks are happier to lend money to people who are existing customers. Check the personal loan interest rates for the bank that manages your current or savings account before you start applying to all the banks in Malaysia, and enquire if you can get preferential rates for a bank personal loan. You’ll never know if you don’t ask!
3. Can I take out a loan to settle my existing loans or credit card debt?
Yes, you can. A personal loan is disbursed in one lump sum, leaving you free to do whatever you wish to do with it. Consolidating credit card debt with a personal loan does make sense, and has some benefits. Not only does it simplify repayment (especially with multiple card debt) into a single amount every month, this injection of funds from a personal loan can free up some income for day-to-day use.
On top of that, given that credit card interest rates can go as high as 18% p.a. on the outstanding amount, you could end up paying less interest with a personal loan – just be careful of the fixed rate and how much interest the loan will charge.
4. Can I apply for a personal loan if I am blacklisted on CCRIS?
You can still apply for a personal loan but whether you receive the loan or not is still dependent on the bank. If you have a bad record with CCRIS or any other credit checking agency, it's very unlikely that you will be approved. In fact, applying to every bank in Malaysia for a loan might further damage your credit rating.
If you're in trouble with money, the first thing to do is talk to the bank that you have trouble paying. They would much rather agree on terms that you can manage to pay off your existing loans than to take drastic action against you. If you're staring bankruptcy in the face, talk to AKPK – they can help.
5. Which personal loan is best for me?
Looking for the best personal loan in Malaysia can be time-consuming if you don’t already know what you really need. There are several options of personal loan you can compare and apply on Ringgitplus, depending on your income range, urgency, job sector, and personal preferences.