Personal Loan: What You Should Know

Key Points

  1. Personal loan might be a good solution for those who need quick cash in emergency situations.
  2. Do not apply for personal loans for luxury items used.
  3. Need to have proper financial planning because you will need to repay it monthly consistently.

Loan applications come in many different shapes and sizes, but it’s important to be prepared for what comes next. In this article, we are going to talk about personal loans.

While personal loans have been around for a long time, it’s always good to be aware of what you’re getting yourself into before jumping on this financially risky adventure. There are many misconceptions about them and how they work.

However, in this current global economic situation, getting a personal loan might be a good solution for those who need help under the right circumstances. If you are in a tight spot financially, personal loans may be an option for your family. Here’s what you need to know about them!

What Is A Personal Loan?

When you think about it, personal loans are really just an alternative form of credit. They’re offered by banks and other financial institutions that want to make small lending decisions on your behalf. In short, the bank loans you money, with an interest rate set by the lender. You are required to pay this back over a time period.

People take out personal loans for a variety of reasons, including medical issues and debt consolidation. Many of their customers turn to personal loans when they need cash in an emergency, but some might borrow it for renovation and wedding.

There are two types of personal loans, which are secured and unsecured.


For secured personal loans, you will need to have collateral such as fixed deposit, property, unit trust, and other assets. Guarantors are required too.


Unsecured personal loans don’t need any collateral and guarantor, unless they do not meet requirements.

How Do Personal Loans Work?

The personal loans work in the same way that any other bank loan does. You just have to apply for a specific amount from your lender and wait for approval. Once approved, you will receive the lump sum amount that you applied for or they choose to give.

You will need to repay with principal plus fees and interest monthly until your agreed repayment period ends. You will need to pay for early settlement fees if you choose to pay all the debt earlier. Make sure to contact your lender for more information.


Able To Plan Your Financial Budget

Personal loans offer a flexible tenure that comes with fixed installments, which make it easier for borrowers who need time to map out their monthly payment. There’s a common misconception that having your own personal loan will hurt credit scores. However, if you can keep up with consistent payments this shouldn’t be an issue!

Allow Debt Consolidation

Personal loans are a great way to consolidate all your debt. With this, you can use it for almost anything and when all are paid off with one monthly payment instead of multiple creditor payments that could be stressful.

Get Fast Cash Without Collateral

Personal loans are a great way to get cash when you need it most, like if your car breaks down or an emergency arises with medical bills.

However, we do not recommend using personal loans on luxury items. It should be used for emergencies only. If you are not absolutely certain that a purchase is necessary, don’t take out the loan and instead save up what would have been spent on it.


Lead To Potential Credit Score Loss

Personal loans are like a double-edged sword. They can be very useful if you know how to use them, but taking out one could damage your credit score if you cannot manage to pay consistent payment monthly.

Poor Financial Discipline Lead To Debt Increased

With a personal loan, you need to have good financial discipline and be able to make monthly payments. If you’re not careful with your monthly payments, a personal loan could lead to more unnecessary debt due to interest charge.

Heavier Financial Penalties

The downside of not having any collateral is you can’t exchange your car or house with the lender if they are struggling to make their payments. If you don’t make your payments on time, the interest rates will continue compounding and some banks in Malaysia can even increase your interest rate.

Early Settlement Fee

When you settle your account ahead of time, there’s a fee to pay for the early settlement. You should familiarize yourself with the loan terms and conditions before signing up for any loans.

Who Is Suitable To Apply For Personal Loans?

If you want to get a personal loan, it is important that the money comes in one lump sum and has clear visibility on how much can be paid back monthly.

What Is Interest Rate?

Malaysia’s interest rates are usually charged on a flat basis. The flat interest rate is one where you’re charged on the original amount, without taking into account what was paid.

How Much Can I Borrow From A Personal Loan?

If someone has past due debts or a poor payment history they can still get declined even if their income meets certain requirements. The amount that you are approved for could also be lower than what was applied. If you contact the bank representative if you are not happy with the amount they approved.


Apply for a personal loan only if you have the power to pay it back monthly consistently. The key is not taking out any unnecessary and luxury debt, as this can put your finances in danger and lead towards even more serious issues. Make sure to have good credit before applying for any personal loans.

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