Personal loans are among the most sought after financial offerings in the realm of banking and rightly so. The personal loans form an integral part of a bank’s portfolio of products and services. The main reason for the popularity of personal loans is that it provides the borrower with the much needed additional financing required.
Unlike Home loans or car loans, loan amounts availed under a personal loan does not require any specific purpose to be disbursed. The money availed can be used in any way deemed fit by the borrower. This makes financing an urgent medical expense or funding a child’s higher education or even consolidating outstanding credit card debts an easy and hassle free process.
To appeal to prospective borrowers, personal loans come in a variety of packages. They may offer competitive interest rates or flexible payment terms or faster approvals. The personal loans available in the market today cater to a wide range of consumers who have different financial needs. Maximum loan amounts, tenures and payment options are some of the distinguishing among personal loans that are aimed to acquire more customers. Certain banks even offer promotions on the personal loans such as lower interest rates or specific tenures to attract new customers. Customers can even avail personal finance schemes offered by Islamic Banking institutions if they wish to avail a product that is Shariah compliant. The below table compares the personal loans offered by various banking institutions in Malaysia.
Compare Personal Loan Interest Rates in Malaysia
|Bank||Bank Personal Loan||Interest Rate||Tenure||Processing Fees||Minimum Income Required||Max Loan Amount|
|Bank Rakyat Personal Loan||3.87%||10 Years||Nil||RM1,000||RM200,000|
|CIMB Personal Loan||4.85%||5 Years||Nil||NA||RM100,000|
|RHB Personal Loan||8.18%||7 Years||Nil||RM 2000||RM150,000|
|Maybank Personal Loan||1. 8% (RM5,000 to RM20,000) |
2. 7% (RM20,001 to RM50,000)
3. 6.5% (RM50,001 to RM100,000)
|Bank Islam Personal Loan||7.85%||5 Years||Nil||RM 1,500||RM 150,000|
|HSBC Personal Loan||10.5%||7 Years||Nil||RM3,000||RM150,000|
|BSN Personal Loan||1. 8% (RM3,000-RM5,000) |
2. 6.50% (> RM5,000 – RM10,000)
|10 Years||NA||RM 3000||RM200,000|
|Ambank Personal Loan||8.00% to 11.99%||8 Years||Nil||NA||RM100,000|
|HSBC Amanah Personal Loan||10.5%||7 Years||Nil||RM 3000||RM150,000|
|MBSB Personal Loan||3.40%||10 Years||NA||NA||RM250,000|
What is a Personal Loan?
Personal loans are short-term, unsecured loans offered by banks and non-financial banking companies to cater to the urgent financial needs of the consumers. Personal loans make up a major part of the products and services offered by banks. You can use the loan amount for any personal use, be it a wedding, children’s education, credit card debt payment or home renovation expenditure. Most banks don’t require you to provide a collateral or security against short-term loans.
Why Choose a Personal Loan?
Personal loans are popular amongst consumers as they are convenient and easily available to meet short-term financial needs. Salaried employees, self-employed individuals, and retirees can apply for a personal loan.
- Urgent financial needs: Other than buying a car or a home, consumers may face other financial needs to meet their everyday expenses. Personal loans can come in handy for those who are in a dire financial need.
- Personal use: There are no restrictions on how you use your personal loan. It can be used to pay your outstanding credit card debt or renovate your home.
- No collateral or security required: You don’t have to provide any collateral or security to obtain a personal loan. Very few banks ask for a guarantor’s signature to approve certain types of personal loans.
- Short loan tenure: Unlike loans against mortgages, the loan tenure for a personal loan is below 10 years. You can repay your personal loan within a short time period.
- Easy availability: Banks offer standard and customised personal loans to consumers with varying financial needs. Anyone meeting the eligibility criteria set by the banks, can apply for a personal loan in Malaysia.
- Simple application process: To apply for a personal loan, you have to visit the bank’s official website, fill out an online application form, and upload the necessary documents. If your loan is approved, you will receive the loan within 2 days.
- Bank’s approved list: If you are receiving a steady income from a stable employment in a public or private organisation that is approved by the banks, then your loan approval will be processed quickly.
Features of a Personal Loan
Personal loans offer financial flexibility to those in need. It is imperative that you find out all that is there to learn about personal loans before applying for one. Following are the common features of a personal loan:
Loan amount: The loan amount offered by banks can vary depending on your income and financial requirement. Customers with a higher income can apply for a higher loan amount. The personal loan amount offered by banks in Malaysia ranges from RM1000 to RM1,50,000.
Loan tenure: The repayment period of a personal loan is usually short-term. It can range from 1 to 10 years.
Interest rate: The interest rate on a personal loan will be determined by the banks. It can vary depending on your loan amount, yearly income, credit history, and loan tenure. The interest rate for personal loans is higher as they are mostly short-term loans without the need for any collateral or security.
Early settlement fees: If you repay your loan before the end of the loan tenure, the bank will charge you an early settlement fees. The fee varies from banks to banks.
Late payment fees: If you fail to repay your loan within the loan tenure, then you will be charged late payment fees at the discretion of the bank.
Guarantor: Most banks don’t require any collateral or security for personal loans. However, there are a few banks that require a guarantor’s signature to approve a personal loan. Loans that are approved without any security are called unsecured loans. If you are required to provide collateral or security for your loan, they are called secured loans. Secured loans have lower interest rates than unsecured loans.
Bank Early Settlement Fees in Malaysia
|Bank||Loan||Early Settlement Fee|
|HSBC Amanah||Personal Financing-i||None but requires the borrower to give in a 3 month notice prior to settlement|
|Any Time Money||None but requires the borrower to give in a 3 month notice prior to settlement|
|UOB||Personal Loan||3% of the outstanding loan or RM 300, whichever is higher|
|Bank Rakyat||Personal Financing-i Private||No fee charged but Ibra will be given|
|Mach by Hong Leong Bank||I.O.U Personal Loan||None|
|Hong Leong Islamic Bank||Personal Financing-i||No fee charged but Ibra will be given|
|Hong Leong Bank||Personal Loan||No but requires three months of notice. If not given, 3 months f interest is charged and a rebate is charged on the remaining interest.|
|Bank Islam||Personal Cash Line-i||No fee charged but Ibra given as per policy of the bank|
|Maybank Islamic||Personal Financing-i||None|
|Maybank||Personal Loan||3% of the outstanding loan or RM 200, whichever is higher|
|Al Rajhi Bank||Personal Financing-i||No fee charged but Ibra given on the date of early settlement|
|Alliance Bank||CashFirst Personal Loan||None|
|Alliance Islamic||CashVantage Personal Financing-i||None|
|Quick Cash EDGE||None|
|Standard Chartered Saadiq||Personal Financing-i||None|
|Citibank||Instalment Loan||3% of the outstanding loan or RM 200, whichever is higher|
|AEON||iCash Personal Financing||None|
|RHB||Personal Financing-i for Private||None|
|Personal Financing||1% of the outstanding loan or RM 100, whichever is higher|
|Easy by RHB||Easy-Pinjaman Ekspres||RM 200 when loan is settled within first 6 months|
|CIMB Bank||Cash Plus Personal Loan||1% of the outstanding loan or RM 200, whichever is higher|
|CIMB Islamic||Xpress Cash Financing-i||No fee charged but Ibra given is based on the remaining balance owed to the bank|
Types of Personal Loans in Malaysia
Depending on the financial needs of the customer, banks offer various types of personal loans:
- Unsecured personal loan: Loans that are borrowed without providing any collateral or security are called unsecured loans. The interest rates for this type of personal loans are usually higher than secured loans.
- Secured personal loan: Loans obtained by providing assets as collateral or security are called secured loans. This type of personal loans has lower interest rates in comparison to unsecured loans.
- Fixed rate personal loan: This type of personal loans come with a fixed interest rate. In a fixed rate personal loan, the interest rate will remain the same throughout the loan tenure irrespective of the market conditions.
- Variable interest rate personal loan: Personal loans borrowed on variable interest rates will vary from time to time during the loan tenure based on the change in the market trend.
- Islamic personal loans: Some banks offer specialised personal loans to consumers following the Islamic banking laws. According to the Sharia principle, no interest or fee can be accepted for lending loans.
- Small business loan: Some banks offer small business loans to customers who require financial help to cover their business related expenses like payroll, product launch, marketing, etc.
Personal Loan Interest Rates in Malaysia
Before applying for a personal loan, it is advisable to compare interest rates across banks and choose the one offering the lowest rate. Interest rates vary depending on the banks, loan amount, and loan tenure. Unsecured short-term personal loans usually have higher interest rates. Some banks offer lower interest rates for salaried employees in corporate and government sectors that are mentioned in the approved lists of the banks.
Personal Loan Eligibility
Anyone with a stable income and above 21 years of age can apply for a personal loan. Listed below are the basic eligibility criteria set by the banks for a personal loan applicant in Malaysia:
- The loan applicant should be 21 years of age or above.
- Should be a citizen of Malaysia.
- Should be a salaried employee, retiree, or a self-employed individual.
- Should have a minimum monthly income of RM3000.
- The banks may approve or reject a loan application based on your credit score. Ensure you have a good credit score before applying for a loan.
Foreigners can apply for a personal loan in Malaysia provided they meet the necessary eligibility criteria set by the lenders.
Documents Required for Personal Loan
The documentation process for a personal loan application is simple and minimal. To apply for a personal loan, the following documents have to be furnished by the applicant:
- Salaried employees:
- A copy of your ID card
- The latest BE form and tax receipts
- Previous 3 months payslips
- Last 6 months bank statements
- Self-employed individuals:
- A copy of your ID proof
- The latest BE form and tax receipts
- A copy of your business registration
- Last 6 months bank statements
How to Calculate EMI for Personal Loans?
Bank loans can be repaid through equated monthly installments. EMIs for a personal loan can be calculated using an online EMI calculator before you apply for a loan. Enter the loan amount, interest rate, and loan tenure in the calculator to get the value of your monthly installment. The EMI of your personal loan has to be less than 40% of your monthly income so that your other financial expenses are not affected. Your EMI may also include other charges such as processing fee, late payment fee, early settlement fee, etc.
How to apply for a Personal Loan?
Before applying for a personal loan, compare the interest rates offered by various banks, and choose the one that offers the lowest rate. Personal loans are popular amongst bank customers as the application process is simple and the approval rate is high. To apply for a personal loan, you can go to the nearest bank branch or visit the bank’s official website, fill the online application form, and upload the necessary documents. If your application is approved, you will receive your loan within 2 days.
Get Immediate Cash with a Personal Loan
Personal loans are a popular source of cash for consumers with urgent financial needs. This type of loan involves:
- Minimum documentation
- Quick loan issue time
- Easy availability
- High approval rate
Listed below are the types of personal loans designed to help cover your cash crunch:
Overdraft Facility: Similar to that of a credit card, an overdraft facility against a personal loan will provide you with cash withdrawals up to a certain credit limit. The interest rate for overdrafts is higher than the standard personal loans.
Revolving Personal Loans: This type of personal loan allows you to borrow as much money as you require up to the total loan amount throughout the loan tenure. The interest rate for revolving personal loans will be calculated based on the amount borrowed during the loan tenure and not the total loan amount.
Fast Approval Loans: Some banks process and disburse personal loans within an hour to 2 days. Alliance Bank CashFirst Personal Loan, Hong Leong Mach IOU Personal Loan, Citibank Personal Loan, and Maybank Islamic Personal finance are some of the fast approval loans offered in Malaysia.
Points to Consider Before applying for a Personal Loan
In order to ensure you choose the right personal loan from a reliable lender, you will have to take the following factors into consideration:
- Financial need: Personal loan can be used for any personal financial need. However, it is important that you determine if a personal loan is an absolute requirement to meet your financial need. If it is a want instead of a need, then you can always save up now to spend later.
- Loan amount: Depending on your financial requirement, you can apply for a reasonable loan amount. Applying for a loan amount that exceeds your requirement is not advisable.
- Loan tenure: The repayment period for personal loans ranges from 1 to 10 years.
- Interest rate: Banks offer a lower or higher interest rate depending on your loan amount, income, and loan tenure. Before applying for a personal loan, compare the interest rates offered by different banks, and choose the one offering the lowest rate.
- Service charges: In addition to the loan amount and interest rate, banks charge processing fees, early settlement fees, and late payment fees. Choose a bank with low service charges.
- EMIs: Compare the EMI options offered by different banks before choosing a suitable option for your loan repayment.
- Loan issue time: To meet your immediate financial need, the banks have to process your application and disburse the loan amount in a short time period (less than 2 days).
- Guarantor: Some banks may ask for a guarantor’s signature to approve your loan. If you are signing as a guarantor for someone else’s loan, you will be held responsible if they default on their loan payment.
- Credit score: Banks approve or reject applications for a personal loan depending on an applicant’s credit score. Ensure you improve your credit score before applying for a loan.
Personal Loan FAQs:
Listed below are some of the frequently asked questions about personal loans in Malaysia:
- What are personal loan interest rates?
- The interest rates for a personal loan in Malaysia can be as low as 3.65% to as high as 12.50%. Banks offer higher or lower interest rates depending on the loan amount and loan tenure of your personal loan. Banks offer personal loans with fixed interest rates (same interest rate throughout the loan tenure) and variable interest rates (varies from time to time depending on the market conditions).
- You can repay your personal through equated monthly installments. EMI for a personal loan can be calculated using an online EMI calculator on the bank’s official website. You just have to enter the loan amount, loan tenure, and interest rate in the calculator to get your EMI value.
- You have to be a Malaysian resident, 21 years of age or above with a steady income from a stable employment in a private or public sector organisation. You should also have a good credit score. You should have a minimum monthly income of RM3000.
- Along with your application form, you will have to submit several other documents to apply for a personal loan. Salaried employees, pensioners, and self-employed individuals will have to furnish their ID proof, income proof (payslips), address proof, monthly bank statements, the latest BE form, and tax receipts.
- Some banks in Malaysia offer Islamic personal loans to consumers who wish to follow the Sharia banking laws or principles. Maybank Islamic Personal Financing-i, Alliance Islamic Bank CashVantage Personal Financing-i, BSN AFLAH PRIMA Personal Financing-i, and AmIslamic Bank AmMoneyLine Facility-i are some of the Islamic personal loans offered in Malaysia.
- Most personal loans are unsecured loans, therefore, no collateral or security is needed to obtain this type of loans. However, some banks ask for guarantor’s signature to approve a personal loan. In the case of secured loans, banks require you to provide assets as collateral to borrow a secured personal loan.
News About Personal Loan
Personal loans tenure restricted to 10 years, while Credit card minimum annual income set at RM 24,000
Datuk Chua Tee Yong, Malaysia’s Deputy Finance Minister made a statement that Bank Negara Malaysia has come to a decision to set the maximum repayment period for 10 year for personal with the intention to protect the interest of consumers. Earlier the repayment preiod for personal loans could go to a maximum of up to 20 years. The Finance minister also said that this has benn done to make sure that the common man is not trapped in debt for a long time paying high rate of interest. It has also been noted that personal loan products have fallen by 20% in the years 2012, 2013, 2014 and 2015.
The Finance minister all informed people that an extra effort to avoid bankrupcy through credit card bills is being done by ensuring that the minimum income requirement for cards are met at RM 24,000 is met.
31st May 2016
Businesswomen rank low on loan defaults in Malaysia at 1.4%
The Malayan government is encouraging loans to business women given their steady track record in repaying loans. The default rate among this borrower category stands at just 1.4% as . This indicated higher financial discipline among businesswomen as opposed to their male counterparts who default rate is 10 times higher.
The Deputy International Trade and Industry Minister further encouraged more women to avail loans such as those offered by Amanah Ikhtiar Malaysia (AIM) as it would help business expansion, mostly small and medium enterprises. AIM has funded over 330,000 women in this respect so far, the total loan value of which amounts to billions of Ringgits. He also indicated hopes for local businesses to become export-oriented.
11th September 2015
RCE Continuous Focus on Quality Loans, with Cautious Sentiments
Loh Kam Chuin, Chief Executive Officer, RCE Capital Bhd, said that the company will continue to keep their focus on loans. The company reported a net profit increase by 37.25% in Q1 net earning results that ended on June 30, 2015.
RCE Capital is a non-bank financial institution, providing people with personal finance solutions to to Malaysian government servants, however stays weary despite achieving a 37.25% rise in net profit to RM 9.44 million and growth in revenue by 23.27% to RM37.49 million in first quarter.
Loh also added, “With regard to the business as a whole, we have to be cautious in the present environment. Definitely the focus is not so much on growing the business but more on ensuring that we continue to have good quality loans.”
He mentioned that the largest contribution of almost 100% was made by consumer financing for its business. Loh added saying, “In terms of our commercial (financing) side, we are not really pushing for it right now. It is a high-risk business. That’s why the focus is more on the consumer financing side,”
The group’s total loan base currently is at RM1.2 billion against last year’s which was was hovering around RM1 billion.
7th September 2015