4 Times Personal Loan Makes Perfect Sense

4 Times Personal Loan Makes Perfect Sense

For a lot of people, a personal loan is regarded as the best thing since sliced bread. However, for those who have been burned, they would avoid a personal loan like a plague.

Personal loans exist for a reason and just like credit cards, they have gotten their less-than-shiny reputation due to frequent misuse of the facility. It is understood universally that borrowers have to pay off their loans based on the agreed timeline stipulated in the loan agreement. The onus is on the borrowers to ensure that they are able to pay off their loans before they decide to take them. So, you’d need to be in pretty serious need of the funds before taking up a personal loan.

Despite that universal understanding, some of the most common reasons people take up person loans are for vacations, home renovation, weddings, and even for purchase of big ticket items like a new surround sound system at home.

These are considered low priority spending and should be avoided if one does not have the cash to pay for them. Getting a personal loan for these items only spell trouble because personal loans do not come for cheap.

However, there are instances where you should definitely consider getting a personal loan to save yourself trouble and money in the long run:

1. To avoid issuing a “bad” cheque

If you are regularly making payments with cheques, you would understand the pain of keeping track of the funds available in your current account. Sometimes, errors can happen but if it results in a bounced cheque, you may be paying for your erroneous ways for a long time.

Three “bad” cheques issued over a 12-month period will result in the issuer’s current account in Malaysia being closed for a specified period of six to 24 months depending on the level of offence committed.

Furthermore, a bounced cheque will be recorded and the information disseminated by the Credit Bureau to banking institutions and other financial institutions.

What this means is, not only will the current account with the offending “bad” cheque cease operation, but the information will also be given to all the other banks, resulting in these banks closing all your other current accounts too. To make matters worse, this information can be used against you when you apply for a financing facility in the future.

In other words, you really do not want a “bad” cheque on your record. If there really is insufficient fund in your account for the moment, it makes sense to get a personal loan first to avoid having your cheque rejected by the bank.

However, as with all loans, ensure you have the means to make the payment according to the agreement.

For this instance, it makes sense to get a loan that provide fast approval and disbursement.

RHB Easy-Pinjaman Ekspres

RHB Easy-Pinjaman Ekspres

10 minutes approval and disbursement at Easy Branch

Maximum loan amount of RM50,000 & maximum tenure of 5 years

2. To better manage your debts

It does sound ironic to take up another loan to cover your other debts, but sometimes it may be your ticket to being debt-free. If you know how to navigate around the traps!

If you currently have a few outstanding debts – like other personal loans and credit card balances – it makes perfect financial sense to consolidate your debts into one lower-interest personal loan. By doing so, you may be able to lower your overall interest payments, fix your monthly repayment, and also predetermine your settlement period. Not to mention the ease you’ll feel in managing just one repayment instead of multiple.

If you are taking a RM10,000 personal loan over three years, you will be paying RM328 with a 5.99% interest per annum personal loan. The cost of the loan will come up to RM1,808 (interest charged).

On the other hand, paying off a RM10,000 balance on a 15% credit card will take you six years and 11 months to pay off, and incur about RM3,158 in interest (if you are just paying the minimum payment every month).

Now, doesn’t a personal loan just make more sense in this scenario?

In this case, you will need a low-interest personal loan.

Alliance Bank Fast Cash

Alliance Bank Fast Cash

Fixed rate from as low as 5.99% per annum

Loans can be used for debt consolidation

3. To improve your credit score

Using a low-interest personal loan to pay off your credit card balance doesn’t just save you money, it can save your skin, too (not literally)!

Credit cards are similar to a revolving line of credit, where the lending institution grants you a maximum credit limit, which you can use to make purchases at any time. However, it is difficult to repay a huge balance and free up the credit limit due to the compounding interest.

Personal loans, on the other hand, carry fixed interest rates that do not change during the loan terms. As long as you service your loan on time and according to schedule, the loan will be paid off at the end of its term.

An important part that makes up our credit score is our credit utilisation. This means the percentage that you use on your credit limit – the lower the better, of course. Taking up too much of your credit limit in a revolving line of credit, like a credit card, can cause a score reduction.

By using a personal loan to pay off your credit card debt or other revolving accounts, you will be able to immediately lower the utilisation ratio because personal loans are considered instalments and not revolving accounts.

Over time, if the consumer repays the personal loan without increasing credit card balances, scores can continue to rise.

In this case, you need to choose a personal loan that cost the least for you.

4. To pay for medical emergency

The pain and struggle of not having a medical insurance is only known to those who are suddenly thrown into a world of chaos when they are diagnosed with a long and painful illness that results in a huge medical bill.

If you or your family member do not have a medical insurance, or have one that exempts certain condition, you may not be able to pay for the cost of an operation or expensive medicines.

In this kind of sticky situation, taking out a personal loan may be your safest option. Your physical health should always take precedent to your financial health.

In this case, you don’t have to take out a lump sum of cash up front, and will be able to split the payment into years to make it easier on your finances.

Depending on the amount you need, it is good to look for personal loans with high maximum loan amount and tenure.

HSBC Amanah Personal Financing-i

HSBC Amanah Personal Financing-i

Get Cash Back up to RM1,000 on your approved financing

Maximum loan amount up to RM120,000

Personal loans are not evil and you can borrow responsibly. It only leads to trouble if you are unable to control your finances and your payments.

As personal loans in Malaysia are unsecured, it is perfect for borrowers who need fast cash and do not want to put up any collaterals, and still enjoy fixed rate and payment. The key to not accumulating an insurmountable debt with your loan is: always be prompt and up-to-date with your credit repayments – be it personal loan or others.

To get the best rate on a personal loan, click here to compare rates and terms from all banks.

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