Personal financing can be a great way to quickly access funds to help you deal with all kinds of financial situations such as paying for an unexpected medical expense or building funds to achieve a financial goal.
But the mistake that most people make is thinking that personal financing can be a cure-all for all their financial problems.
Instead, it’s important to look at personal financing as a tool. And just like any tool, there are dos and don’ts that you need to be aware of before you use it!
What is personal financing and how do you apply for it?
Before we get into the dos and don’ts, let’s quickly go through and explain what personal financing is.
Personal financing is an amount of money that you can borrow from financial institutions for any variety of reasons.
There are two types of personal financing, secured and unsecured. The difference is that secured personal financing requires collateral whereas unsecured does not.
When applying for personal financing, it’s always recommended to go for reputable financial institutions and banks that are licensed by Bank Negara Malaysia.
Choosing reputable banks such as MBSB Bank will ensure that you get professional service from a licensed bank to look after your financial needs.
While Islamic banks such as MBSB Bank offer Shariah-compliant personal financing, many often believe that it’s only Muslims that can apply for it.
The truth is, both Muslims and non-Muslims can apply for Shariah-compliant personal financing. This means that even if you’re a non-Muslim, you can still enjoy the perks and benefits that come with Islamic personal financing.
What are the Do’s for personal financing
There are some clear Do’s that you should consider before applying for personal financing. That’s because not following them could expose you to financial risks.
Do use it to consolidate debts
If you’re in a position where you are burdened with multiple financial commitments such as paying one or more credit card balances, consolidating those debts with personal financing can be a way to simplify your way of paying them back.
Instead of paying multiple credit cards with different profit rates, you can put it all under one monthly payment with personal financing. And, depending on the terms and the amount of debt, it might even save you time and money.
Do calculate your total costs
One of the things that you need to keep in mind is the overall costs of getting personal financing. One of the biggest contributors towards your total cost is the profit rate you need to pay from taking on longer payment terms to paying lower monthly payments.
Other forms of costs that you need to be aware of include processing fees, withdrawal fees, and prepayment charges. While a lot of these fees might seem small in the beginning, they can easily add up if you’re not careful.
Do check your monthly commitments
Before you can even consider applying for personal financing, you need to check what your monthly financial commitments are and whether it allows you to take on another form of financing.
A quick way to do this is by calculating your debt service ratio, Here’s how:
Total Monthly Commitments (rent, vehicle financing, etc.) / Total Net Monthly Income X 100%= Debt Service Ratio
Anything above 60% is not recommended for you to take on an additional financial burden and more importantly, puts you at a higher risk of not being able to make your monthly payments.
What are the Don’ts for personal financing
It’s understandable that when faced with financial difficulties, we tend to overlook details when making financial decisions.
But if there are certain Do’s that you need to follow, then there are certain Don’ts that you also need to be aware of.
Don’t borrow more than you need
If you’ve come to a point where you require personal financing, always remember to avoid borrowing more than you need. Calculate exactly how much you need and how much you can realistically afford as part of your monthly financial commitments.
We know it’s tempting to get as much cash as possible, but having more than you need puts you at unnecessary risk that could push you towards an even bigger financial crisis.
Don’t use it on luxury spending
Whether it’s to cover unexpected emergencies, pay for necessary household repairs, or to consolidate your debts, you should always consider why you would need personal financing before applying for one.
What you should NOT do is apply for it to fund things that are not a necessity like paying for a holiday trip or buying luxury goods such as a new gadget or a smartphone. If it’s not to pay for something that you need, then you don’t need it!
Don’t miss your monthly payments
Paying your monthly payments late, or worse, missing out on the payment entirely will not only mean that you get penalised with extra fees but it could also affect your credit score.
If you find yourself not being able to make your payments or are on the verge of defaulting, you need to get in touch with the bank or financial institution to discuss possible steps you can take.
Get financial assistance quickly with MBSB Bank Personal Financing-i
MBSB Bank is currently running its Personal Financing-i X-Change campaign for people who need cash immediately to help with their financial situations.
From now until 31st December 2023, when you apply for MBSB Bank’s Personal Financing-i, you’ll get to enjoy the following benefits:
- Deferred payment for 3 months
- Total financing up to RM400,000
- No security deposit
- 24-Hour Approval*
- SBR**+2.80% p.a. equivalent to Flat Rate of 3.06% p.a.
*Subject to complete information and supporting documents for credit assessment.
**Current Standard Base Rate (SBR) is 3.00% p.a.
Before you apply for MBSB Bank’s Personal Financing-i, check to make sure that you are eligible for it. Here’s a quick rundown of what the requirements are:
- Must be a Malaysian Citizen of at least 19 years old (Public Sector)/21 years old (Private Sector) and not exceeding 60 years old upon the expiry of the facility or opted retirement age, whichever comes first;
- Permanent/contract employee of Government, GLCs, local councils and selected private companies having salary deduction arrangements with the Bank;
- Minimum monthly income of RM3,000 (inclusive of gross salary, fixed allowance and other non-fixed income);
- Must open Current Account-i/Saving Account-i (CASA-i) with the Bank;
- Must subscribe to Group Credit Family Takaful (GCFT) coverage and other Banca Takaful/Wealth products with the Bank;
- AM-PM disbursement’ applies for any complete PF-i applications submitted before 12.00 p.m. will be disbursed on the same day. Any applications submitted after 12.00 p.m. will be disbursed on the next working day.
At the end of the day, personal financing is still a tool and knowing how to use it correctly will help you achieve your goals.
When used effectively, it can certainly help you reorganise your finances and reduce your financial stress, but only if you know how to manage your monthly commitments.
