Personal Loan

What is a personal loan?

A personal loan is a type of instalment credit provided by a financial institution (bank) to a borrower (you) in a one-time cash payment. You, as a borrower, must pay back the amount plus interest either in regular or monthly instalments over the loan’s term agreement. Personal loans can be divided into secured loans (backed by collateral) and unsecured loans (no collateral required).

Why should I apply for a personal loan?

  • To combine your outstanding credit card debts
  • For emergencies, repair, and replacements purposes
  • For business purposes

You can also apply for a personal loan due to other factors.

What are the types of personal loans available in Malaysia?

These are the types of personal loans in Malaysia:

  • Home loan
  • Car loan
  • Business loan
  • Weddings loan
  • Home renovation loan
  • Overdraft facility
  • Shariah-compliant loans

What are the differences between a secured loan and an unsecured loan?

  • Secured loan – A loan secured by collateral, such as a car, a house, stock options, bonds, or personal property. Assume that if you do not repay the loan as agreed, the lender (bank) has the right to repossess the collateral to pay off the loan.
  • Unsecured loan – A loan that does not require collateral and includes credit cards, student loans, or personal loans. However, you may be charged higher interest rates and must have good or excellent credit.

What are the eligibility criteria to apply for a personal loan?

The most common eligibility criteria to apply for a personal loan include, but are not limited to:

  • Malaysian, Permanent Resident, or foreigner
  • Between 21 to 60 years
  • Employed
  • Has a salary or a disposable income

How long will a personal loan application process take?

The personal loan application process is typically completed in 48 hours or less. However, it is dependent on the bank you have chosen.

Which platform can I apply for a personal loan from?

There are two platforms from which you can obtain a personal loan:

  • Online: You can apply for a personal loan by going to the selected bank’s website
  • Offline: You can apply for a personal loan by going to one of the selected bank’s nearby branches

Why did my personal loan application get rejected by the bank?

The following are the most common reasons why the bank rejected your personal loan application:

  • Bad credit score
  • You have too many loans
  • Salary is insufficient to meet the bank’s requirements
  • There is no credit history
  • Uncertain employment history
  • Incomplete or missing information or paperwork

Other factors that may cause your personal loan application to be rejected.

Does a personal loan generate interest?

Yes, every personal loan will incur interest. However, interest rates vary depending on the type of loan you are applying for and your chosen banks. Typically, the average interest rate on an unsecured loan is around 6-10% p.a., whereas a secured personal loan is between 5-8% p.a.

What are the common fees?

The common fees when you apply personal loan are:

  • Processing fee
  • Stamping fee
  • Early repayment charges
  • Late payment charges

However, it varies from one bank to another.

What is the repayment tenure for personal loans?

Most banks or financial institutions allow borrowers to select a loan tenure ranging from 1 year to 5 years based on their needs. However, different banks may have additional terms.

What are the common terms for personal loan?

  • “Annual Percentage Rate (APR)”

    The yearly total cost of borrowing money. This rate includes the interest rate as well as any additional finance charges.

  • “Borrower”

    When you apply and receive a loan, you are considered the borrower and must repay the loan according to the terms agreed upon.

  • “Lender”

    The entity that gives out the loan to you and in this case, it is the bank.

  • “Collateral”

    The asset that the lender has the right to seize if you fail to repay the loan, and it can include a car, house, cash, or investments.

  • “Credit score”

    The bank will look at your credit score to determine how much of a risky borrower you are. As a result, you will be able to repay your loan.

  • “Late fee”

    If you pay your loan payment after the due date, your lender may charge you a late fee.

  • “Prepayment penalty”

    You will be penalised if you try to pay off your loan before the specified loan term.