Personal loans are offered by banks and financial institutions in Malaysia whenever you are in need of funds.
Personal loans offered have a loan amount limit, loan tenure, and interest rates which are based on your eligibility as per the rules imposed by banks or financial institutions. You can get personal loans with limits ranging from a minimum of RM2,000 which can go up to a maximum of RM150,000. Many banks also offer flexible and long tenure periods which range from 12 months up to 84 months.
Though personal loans in Malaysia are roughly classified into 3 types, there are 2 forms of personal loan issued.
Basic variations of personal loans
Unsecured Personal Loans:
Most of the personal loans offered in Malaysia are unsecured loans. For such personal loans, you need not present a guarantor or a collateral to be eligible for the loan. Since these loans are unsecured, you may have to present a proof of your financial stability to the bank for the loan to be approved. This is to ensure that you would repay the loan on time. These loans would also have higher interest rates when compared to secured loans.
Secured Personal Loan:
Secured personal loans require you to provide a guarantor or collateral to get the loan approved. If you present a guarantor to get a personal loan, then the guarantor would be responsible for the loan repayment if you default on the loan. If you present your house, car or land as collateral for the loan, then the bank may possess the collateral until you settle the loan in full.
Types of personal loans issued in Malaysia:
Instalments loans are the common type of loans issued as personal loans. If you get an instalment loan, then you need to repay the loan in form of minimum monthly instalments over a period of time. The loan tenure and loan amount would be as per your preference if you are eligible for the loan. The interest rates would be informed to you at time of loan application.
Revolving loans are a bit similar to instalment loans where the loan amount is approved in full by the bank. But you would not get the entire loan amount for usage. You can use any amount needed within the assigned loan amount. The amount you withdraw should not exceed the total approved loan amount.
When you repay the loan, you have to only pay the principal amount that you withdrew along with the interest for the amount you borrowed. For this loan, the interest is calculated on the amount you withdraw, not on the total available credit limit. Once you finish paying back what you withdrew, you will be able to withdraw the same amount again.
As the name suggests, overdraft loans means that you can withdraw funds from your bank account even when you reach or cross your credit limit. Overdraft loans do not require the same process and regulations that apply to instalment or revolving loans. Overdraft loans usually come with high interest rates that can prove to be quite expensive for you especially when you use overdraft loan to pay medical bills or other expenses.
Type of Interest Rates for Personal Loans
When it comes to interest rates, personal loans offered in Malaysia can be categorised into 2 types, fixed interest and variable interest rates.
- Fixed Interest Rates: A personal loan with fixed interest rate will have the same interest rate for the entire loan period even if there are fluctuations in the market. Usually loans with fixed interest rates will have a fixed instalment amount every month for the whole loan tenure. If you wish, you could pay more than the monthly due amount where the extra amount would be accepted as advance payment.
- Variable Interest Rates: Personal loans with variable interest rates would change during the loan period based on the market rates. If the market rates are low, then it would be beneficial for you as you would pay low interest rates. But if the market rate goes up, then you may have to pay more than the usual interest rate.
If you decide to get any type of personal loan, carry out as much research as you can and always go in for a loan that you can pay back with ease.