If you have a piled up debt or an amalgamation of bills to handle, and you are thinking of the ways to manage it, a debt consolidation loan could be your answer. Debt consolidation loans are designed to pay off your pending bills and debts. If you are looking for more information on how you can be benefited from it, here’s a roundup of how you can consolidate your debts with personal loan.
Consolidating means paying off your small loans or debts with one big loan that covers them all. This means, you do not have to worry about missing out payments on numerous, smaller loans. Upon acquiring a debt consolidation loan, the bank offering the loan settles the other outstanding loan amounts and open lines of credit and leaves you with just one loan to repay. After getting a debt consolidation loan, you will just be paying one monthly instalment towards the debt consolidation loan.
For example, if you have to pay RM1,000 on one credit card and RM2,500 on another, moreover, you also have a personal loan of RM10,500 that needs to be paid off; you can consolidate all these three debts in one and pay it all off with a single personal loan of RM14,000.
Consolidating multiple debts with a personal loan can be beneficial because as you are paying only for one single loan, you are also paying the interest for one particular loan. This is a good scenario compared to when you have to pay for multiple interests on your different debts. The interest/profit rates provided by the banks for different personal loan schemes start from as low as 4.30% p.a.
Not only does it help with managing multiple credit card bills and debts, you can also use the debt consolidation loan to pay off your other loans such as hire purchase financing etc.
Moreover, as a personal loan comes with fixed rates and a predetermined monthly instalment, it will be easier to manage your finances as you already know the amount that will be charged to you monthly.
You will have to submit the following documents to obtain a consolidation loan:
Q. What fees and charges do I have to pay if I acquire a debt consolidation loan?
A. If you are thinking of a debt consolidation facility with a personal loan, you will have to pay all the fees and charges that are applicable for a conventional or Islamic personal loan facility. Depending on the bank you are opting for, the applicable fees and charges may inclusive of processing fees, stamp duty charges, government service tax (if applicable) and other bank specific charges.
Q. What is the maximum amount of debt consolidation loan that I can obtain in Malaysia?
A. Depending on our income and credit score, you can take as much as RM400,000 as a consolidation loan with the help of banks in Malaysia. The minimum lending amount is around RM1,000. An applicant can generally get a personal loan amount which is 3 to 4 times his/her salary or a fixed sum decided by a particular. However, the amount differs from bank to bank.
Q. What is the basic eligibility criteria to get a consolidation loan through a personal loan?
A. You need to be a Malaysian resident or permanent resident of Malaysia to apply for the loan. You should be above 21 years of age and the maximum age should not exceed 60-70 years, or as per the bank’s discretion. You should also meet the monthly income criteria set by the bank you are acquiring the loan from.
Q. Do I need to present a guarantor or collateral to obtain this loan facility?
A. The consolidation loans are mainly unsecured personal loans that do not need to present a guarantor or a collateral.
Q. Which banks provide debt consolidation loans in Malaysia?
A. The major banks that provide debt consolidation loans to the Malaysian customers include Hong Leong Bank, HSBC, AmBank, Bank Rakyat, Alliance Bank, Citibank etc. Chiefly, all major banks in Malaysia offer personal loan facilities to the customers.
Q. How can a debt consolidation loan help in in saving money?
A. A debt consolidation loan can help you save your money for both short term as well long term scenarios. In the short term, you will be paying less each month in the form of one loan instalment compared to the multiple different minimum payments, keeping your balance on track. In the long term, you can get a more flexible interest rate and hence you pay less interest over time as well.
Q. Can I get the debt consolidation loan if I have a bad credit with the bank?
A. With a bad credit history, it is difficult to get a personal loan that covers debt consolidation. However, you can consult with your bank for the possibility of a secured personal loan for which you might have to keep a substantial collateral.
Q. How is debt consolidation loan and debt management different?
A. In debt consolidation loan facility, you have to borrow money from an external entity such as a bank or a financial institution to manage your finances and pay for it later. Whereas in debt management, you are not borrowing any money but you are hiring the services of an external entity to help you manage your finances. This includes credit counseling, financial planning etc.