People opt for personal bank loans for a variety of reasons; education fees, holidays, weddings, personal emergencies – even transferring outstanding credit balances from credit cards, as credit card interest is often higher than that of bank loans. Whatever the reason may be, it is important to understand the different types of personal loans before applying for one that suits your needs.
1. Personal Loans
Personal loans in Malaysia are typically unsecured – you don’t have to put up any collateral when getting the loan. Aside from mortgages and car financing, this is the most commonly seen type of personal bank loan in Malaysia. They are often taken up for numerous reasons, such as paying for debt consolidation, for high-ticket purchases or even start-up financing.
For the approvals of such loans, consider the following:
The amount you want to borrow
The higher the amount you ask to borrow, the less likely you will get your approval fast. There will be many checks conducted by the institutions to ensure that you have the ability to pay back in the future.
Your personal credit rating
Institutions and banks will review your credit rating by analysing your monthly income and the amount of liabilities that you are carrying. If they deem you to have the capability to pay back with all your current financial liabilities, they will approve your loan. GoBear Malaysia recommends that in any case, your total loan repayments should not exceed 60% of your nett salary.
2. Car Loans
These are loans used for the purchase of motor vehicles. Some of the documents required to apply for car loans may include:
- Registration of the vehicle
- Photocopy of Passport, NRIC (both sides), work permit, driver’s licence etc.
- Income Proof (such as latest payslips, latest EPF Statement or Borang EA or bank statements over the past 6 months if self-employed)
- Sales and Purchase Agreement
There are also certain rules that have been imposed by Bank Negara Malaysia:
- The maximum loan tenure for any car loan is no more than nine (9) years or 108 months
- The maximum loan amount is 90% of the purchase price of the vehicle
Be advised that conventional car loans in Malaysia are technically Hire Purchase agreements, where the bank undertakes to buy the car or other vehicle, and you ‘hire’ the car until all the payments have been made in full, whereupon ownership of the car then transfers to you.
3. Housing Loans
Also known as mortgages, housing loans help ordinary Malaysians to finance the purchase of their first (or subsequent) homes. Housing loans are secured loans; the collateral being the house being purchased itself.
In order to apply for a housing loan, similar documentation is required as that for car loans as detailed above.
Bank Negara Malaysia regulations on housing loans include:
- A maximum loan tenure of up to 30 years, or until you turn 65, whichever is earlier
- A maximum loan amount of up to 95% of the property’s purchase price (or market value for completed properties)
While the three different types of loans above cover the majority of personal loans that banks in Malaysia offer, individual banks also offer different types of loans. For example, some banks offer overdraft facilities, loans specifically for education, the purchase of Amanah Saham Bumiputera (ASB) units or other shares, and so on. If your needs are specific to those areas, it may be worthwhile to check out the banks that offer them.
You may have heard of other types of loans, such as payday loans, or foreigner loan, or cash advance loans. These are loans usually offered by licensed moneylenders other than banks, and should be carefully studied before deciding to take them up. However, under no circumstances does GoBear Malaysia recommend you to take up loans offered by unlicensed moneylenders (otherwise known as ‘Ah Long’s).