Personal Loan

Guide to Personal Loan

Nowadays, although most people have some small savings in the bank, there are still moments when they need to borrow money from the bank for emergency liquidity. If you need money for some reason, the quickest way is to get a personal loan from a nearby bank. Before you get it, there are some terms you will need to to know about.

Understanding a personal loan.

Banks specialize on lending for large-ticket things like houses and automobiles. The asset is used as a guarantee for repayment in this type of borrowing. They will take ownership of your property if you do not repay. If you only need money for a few small purchases for an emergency, you will not have anything to act as a guarantee.

Personal loans can help in this situation. With a personal loan, you can do anything with the money you borrow. Personal loans are more difficult to obtain and sometimes come with high interest rates because the bank does not have an asset to protect your repayment commitment.

Personal loan interest rates are often fixed and charged annually on the entire amount borrowed, rather than on a diminishing balance like a home loan. This implies that no matter how much of your loan you repay,  you will pay the same amount of interest as you did from the beginning.

The maximum number of years for repayment has been established at ten by Bank Negara, while most banks would grant you between 7-8 years.

Places to get a personal loan.

The first place to seek would be a commercial bank, whether local or international. Most individuals prefer commercial banks because their rates are cheaper than those given by alternative lenders such as loan sharks.

Banks are also licenced institutions governed by Bank Negara. They must follow government policies and lending laws. This is true for both conventional and syariah-compliant personal loans. Therefore,  the rules are the same for the two types of banks.

A bank’s loan approval standards will be stricter, and there are several checks before you can borrow cash.

All of your payments are calculated by banks to guarantee that you can afford them. If you are rejected a loan, it is most likely because of your insufficient income.

Pros and Cons

Depending on your income level, you can acquire a personal loan from RM2,000 to RM250,000. Interest rates can be rather high. 
In most circumstances, the interest rate will not change over the course of the loan. The more you borrow and the longer it takes you to repay it, the more interest you’ll have to pay. 
If you have an excellent credit score, many banks will offer you a lower interest rate.  If you pay off your loan quickly, you will incur additional costs such as processing fees, documentation fees, stamp duties., early settlement fees and penalties. 
It is simple to apply for a personal loan, particularly from institutions with which you already have an account.You will not save money by paying more on your personal loan unless you want to reduce the loan’s term from the start.

Personal Loan Terms

1. Interest rates:

Personal loans have lower interest rates than credit cards, but they are higher than home or vehicle loans. They’re normally around 8% and above, while some special sorts of loans, such as the BSN personal loan for government employees, are significantly lower. Express loans (loans that you receive within 24 hours) might have a high interest rate of up to 20%. Interest rates for personal loans are often fixed (calculated based on the amount borrowed rather than the balance at the end of each month/year).

2. Loan tenures:

The length of a personal loan might range from one to ten years, depending on your credit score and income. It’s usually better to go with the shortest term you can afford because you’ll save a lot of money on interest.


If you know how to use a personal loan to your advantage, it may be a huge benefit. Interest rates are typically lower than credit card rates. It provides fast cash in situations where your card won’t suffice. The fixed payments allow for a more disciplined repayment approach. Unlike a credit card which allows you to pay only the minimum, a personal loan forces you to pay a fixed amount every month, assuring that you will repay the loan in full at the end of the term.

All in all, a personal loan might be a lifesaver when you truly need money for an emergency. Simply look for the best loan with the lowest interest rate for your demands and income.

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