Advantage of Personal Loan in Malaysia

One of the best advantages for a loan applicant to choose personal loan over other types in Malaysia is the approval duration. In contrast to other loans such as housing loans, car loans, and etc., the bank can approve a personal loan application within 24 hours or the day itself. Besides that, the nature of the personal loan is not bound to any restrictions on what the personal loan applicant can spend on. Hence, the personal loan applicant can spend the money on home renovations, debt consolidations, car repair bills, and etc.

However, while a personal loan has the advantage to solve immediate financial worries, it can also be a double edge sword. The following narrative will give you a better understanding the disadvantages.

Back in 2003, Ahmad applied for a personal loan package from a particular bank and had his monthly repayment period increased to 7 years. Despite that, Ahmad had no choice but to resort to applying for another personal loan after experiencing some financial emergencies later on. The bank gave another approval but with a condition imposed and the condition was Ahmad has to settle the original loan using the fresh money disbursed from the new personal loan. In financial terms, this is known as the overlapping facility. In summary, Ahmad had to pay higher monthly instalments and had his monthly repayment period extended from 7 years to 10 years. While Ahmad was able to secure some money to solve his immediate financial worries, he is now burdened with additional responsibilities such as higher monthly repayment amounts and longer repayment period.

There are various personal loans in malaysia such as cimb personal loan.


Reasons for Personal Loan

According to a financial consultant, people usually apply for personal loan packages to buy a house, buy a car or start a business because they do not have the available financial resources to do so before applying for a personal loan. Moreover, the process of applying for a personal loans application is simple, direct, and made easy because most banks and financial institutions in Malaysia offer personal loan packages that do not require any guarantor, collateral, and additional security deposits. With regards to that, personal loan applicants only need to submit several required documents including a photocopy of the MyKad for front and bank, latest 3 months’ salary slips, letter of confirmation from the employer, latest 6 months EPF statements, BE form with tax receipts, and other related documents which the bank will ask for should it be necessary. Usually, the banks will approve the personal loan application as fast as within 1 day but sometimes, the personal loan applicant may have to wait up to 7 working days for the personal loan application approval. As a result of not requesting guarantor, collateral or additional security deposits, personal loan interest rates are typically higher in nature so that the banks can reduce their risks.

Some people have no choice but to resort to applying for a personal loan due to their poor credit record and the lack of assets for collaterals. Assuming if a person wants to buy a house, he or she can always look for another alternative loan known as the home equity loan. Nevertheless, the loan applicant needs to put up his or her house as a collateral in order to qualify to take a home equity loan. So, what happens to those that do not have any collateral to do? According to this financial consultant, a personal loan could be the most sensible option to finance a large purchase or expense as compared to buying using credit cards, which will charge even higher interest.


Another reason of people applying for a personal loan is to consolidate debt. It makes perfect sense to pay off the high interest on the credit card charges with the lower interest rate of the personal loan. However, if the personal loan applicant credit score is low, it is more difficult for him or her to get a personal loan package with lower interest. In an event like this, one of the better suggestions is to secure better terms by getting a family member to co-sign the agreement hence guaranteeing repayment to the bank or financial institution. If the co-signer agrees to make the repayments should the original personal loan applicant default, the personal loan applicant is likely to enjoy lower interest rates. Getting a co-signer is also difficult because that person is responsible for repaying the remaining loan balance if the original personal loan applicant defaults.

In conclusion, it is important for all personal loan applicants to understand that getting a personal loan is a commitment. Decide carefully and choose the suitable money-lender by evaluating based on its stability, flexibility, repayment schemes, and interests rates. Bear in mind that lower interest rates usually equals to longer repayment periods.