{"id":26130,"date":"2023-08-21T16:45:54","date_gmt":"2023-08-21T08:45:54","guid":{"rendered":"https:\/\/www.imoney.my\/articles\/?p=26130"},"modified":"2023-08-21T17:46:34","modified_gmt":"2023-08-21T09:46:34","slug":"the-malaysians-guide-to-comparing-personal-loans","status":"publish","type":"post","link":"https:\/\/www.imoney.my\/articles\/the-malaysians-guide-to-comparing-personal-loans","title":{"rendered":"The Malaysians\u2019 Guide To Comparing Personal Loans"},"content":{"rendered":"

As you sit on a lumpy sofa in the middle of your living room, listening to the water drips from a leaky roof as the rain taps on your window pane relentlessly, you may be contemplating a makeover for your life. It\u2019s not surprising that most of us find ourselves strapped for cash and feel like we are stuck in a financial rut \u2013 unable to move forward.<\/p>\n

It\u2019s not impossible to have a financial overhaul when we feel stuck. There are many financial products out there that may be able to give us a boost towards the right direction. If these products are used to our advantage, we may find ourselves improving our finances and our life.<\/p>\n

One such products are personal loans. It is one of the easiest credit facility an individual can take up because it requires no collaterals. In fact, you can get a personal loan application in Malaysia<\/a> approved within 10 minutes.<\/p>\n

However, just because it is easy to get doesn\u2019t mean everyone should get one. It is a credit facility that comes with interest after all.<\/p>\n

Personal financing\u00a0can be used for debt consolidation, or pay off education or training fees, home improvement, car financing, medical expenses and other emergency expenses.<\/p>\n

Whether it is a good or bad decision lies in its purpose. Getting a personal loan for a vacation or to buy a new TV is definitely not a great idea. However, getting a personal loan to fund home improvement, which will increase the value of your home, is not a terrible idea.<\/p>\n

However, taking up any credit facility must come with serious considerations on all factors. You wouldn\u2019t want to land yourself in financial dire straits when you are unable to pay for your monthly repayment.<\/p>\n

Here are the major factors you should look out for when you are shopping for a personal loan in Malaysia:<\/p>\n

<\/span>1. Attractive financing rates<\/strong><\/span><\/h2>\n

Whenever you are getting a credit facility, the most important factor to look at is the financing rate. Although this is an important factor, it is not the only factor you should consider.<\/p>\n

This is why comparing personal loan\u00a0plans<\/a> available in the market is crucial when you are looking for a personal loan. A package that allows you lower financing rate according to requirements give you the possibility of getting a cheaper loan.<\/p>\n

As a personal loan is approved based on your credit standing, which includes your income and credit report, it is important to ensure your credit report is on tip-top condition.<\/p>\n

Here\u2019s how much you could save on finance charges with lower financing rate:<\/p>\n\n\n\n\n\t\n\t\n\t\n\t\n\t\n\t\n\t
<\/td>
Bank X<\/center><\/td>
Bank Y<\/center><\/td>\n<\/tr>\n
Flat financing rate<\/td>
4.95%<\/center><\/td>
13.75%<\/center><\/td>\n<\/tr>\n
Effective financing rate<\/td>
9.22%<\/center><\/td>
21.00%<\/center><\/td>\n<\/tr>\n
Loan amount<\/td>
RM30,000<\/center><\/td>
RM30,000<\/center><\/td>\n<\/tr>\n
Loan tenure<\/td>
3 years<\/center><\/td>
3 years<\/center><\/td>\n<\/tr>\n
Monthly repayment<\/td>
RM958<\/center><\/td>
RM1,130.25<\/center><\/td>\n<\/tr>\n
Total interest over loan tenure<\/td>
RM4,488<\/center><\/td>
RM10,689<\/center><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n\n

Based on the table above, you save a whopping RM6,201 in finance charges when you opt for a lower financing rate. That\u2019s a lot of money to be saving in three years!<\/p>\n

<\/span>2. Longer loan tenure<\/strong><\/span><\/h2>\n

How long you can take up the loan for can affect your monthly repayment and your overall cost of lending. The longer your loan is, the lower your monthly repayment will be, but the higher your financing charges will come up to.<\/p>\n

For some banks, the financing rate also inches up in tandem with your loan tenure, which means, the higher your tenure, the higher your financing rate is.<\/p>\n

Based on Bank Negara Malaysia\u2019s ruling, the maximum loan tenure for personal financing in Malaysia is 10 years. However, many banks offer a maximum loan tenure of only up to five years.<\/p>\n

If you are looking to borrow a big amount and you are unable to commit to a big monthly repayment every month, it makes sense to opt for a longer loan tenure. Though the financing charges can be quite high, it\u2019s still better than defaulting on your loan payment, which can have really bad consequences for your finances in the future.<\/p>\n

Here\u2019s how much a different in loan tenure can make on your repayment:<\/p>\n\n\n\n\n\t\n\t\n\t\n\t\n\t\n\t\n\t
<\/td>
3-year tenure<\/center><\/td>
10-year tenure<\/center><\/td>\n<\/tr>\n
Flat financing rate<\/td>
4.95%<\/center><\/td>
5.44%<\/center><\/td>\n<\/tr>\n
Effective financing rate<\/td>
9.22%<\/center><\/td>
9.37%<\/center><\/td>\n<\/tr>\n
Loan amount<\/td>
RM30,000<\/center><\/td>
RM30,000<\/center><\/td>\n<\/tr>\n
Loan tenure<\/td>
3 years<\/center><\/td>
3 years<\/center><\/td>\n<\/tr>\n
Monthly repayment<\/td>
RM958<\/center><\/td>
RM386<\/center><\/td>\n<\/tr>\n
Total interest over loan tenure<\/td>
RM4,488<\/center><\/td>
RM16,320<\/center><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n\n

By opting for a lower tenure, you are potentially eligible for a lower financing rate, compared to the maximum 10-year tenure. However, you can see a stark difference in the monthly repayment amount \u2013 at RM572 a month! If you are really short on cash every month, it makes sense to opt for a longer tenure so you can manage your monthly repayment effectively.<\/p>\n

As you can see there is a huge different in total interest for both tenures. For the 3-year personal loan, you only incur a cost of RM4,488 for the loan, while the 10-year tenure\u2019s cost of lending comes up to a whopping RM16,320!<\/p>\n

There are pros and cons of short and low tenure for personal loan. As a rule of thumb, it always make better financial sense to choose the lower tenure, however, only if you are able to commit to the higher monthly repayment.<\/p>\n

<\/span>3. Minimum requirements<\/strong><\/span><\/h2>\n

Once you have compared the above factors, you would have shortlisted a few personal loan that fit your criteria. The next step is really important to ensure that your application is not rejected by the bank.<\/p>\n

You need to fit the bank\u2019s minimum application requirements. The more flexible the requirements the better, as your chances of getting approval are higher.<\/p>\n