Are you struggling in fulfilling your project due to a cash crunch? What are your emergency plans to rescue yourself from the hole? One of the best ways to get the needed money is by applying for a personal loan in Malaysia. Unlike others, personal loans are a bit easy to access if you meet the eligibility criteria set by your financial service provider. Like any other loan, personal loans are approved by banks or any other financial institutions when they are satisfied that you can pay back. These institutions will extensively scrutinize and verify whether you meet the eligibility mark. Usually, personal loan eligibility differs from one bank to another. But, some common factors banks consider are credit score, monthly income, debt-to-income ratio, and payment history. However, regular bank criteria don’t always apply since you can be eyeing secured or unsecured personal loans. For secured personal loans, banks will include collateral alongside other things that apply to unsecured loans. However, for unsecured personal loans, collateral isn’t a must, and banks usually rely on personal monthly income, like salaries, to determine the qualified amount. If you want to borrow money from a bank but wondering where to start, this guide is the ultimate solution. It explores essential information regarding the eligibility of personal loan in Malaysia. Understanding Personal Loans https://www.pexels.com/photo/woman-in-brown-button-up-shirt-beside-brown-wooden-table-6964334/ How Do Personal Loans Work? Personal loans are interest-based loans issued by financial institutions like banks, microfinance, and others for personal improvement or to meet current financial needs. Since the loan isn’t secured often, most people apply for it. Here are some reasons users apply for personal loans: Debt Consolidation: Personal debt consolidation is a loan people borrow to pay other debts. Emergencies: An emergency loan is a loan that allows you to access cash quickly to cover emergency issues like medical bills and household expenses, among others. Home Renovations and Repairs: This is a loan that people borrow to upgrade, renovate and repair houses or upgrade furniture. Vacations: The loan you can use to cover your travel expenses; it’s usually unsecured. Wedding Expenses: When doing a wedding, this is a type of personal loan to borrow to cover the expenses. It’s usually unsecured, but you need a saving account. Car Personal Loans: Personal car loans are used for settling costly car repairs and not purchasing a vehicle. To buy a car, you need to borrow a car loan. Typically, a personal loan is part of a bank loan, which works like any other loan. To borrow the loan, you must apply to your bank or any other financial institution where you are a registered customer. These institutions will check your eligibility by consulting CCRIS to see your credit score. This means if you have a good payment track record, the higher the loan limit you get, favourable loan terms, and interest rates. Once the bank is satisfied with your credit score, among other requirements, it will process and disburse your money. However, you should know that banks offer varying loan repayments duration and interest. Depending on the amount borrowed and lender, you can expect a repayment duration of 6 months-10 years. Since the Central Bank of Malaysia allows for up to a maximum of 10 years for personal loan repayment, you can’t get more time than this. The good thing is that these loans are available in different forms with varying personal loan terms. This helps the banks to accommodate different people; salaried and self-employed people. Some loans available in the Malaysian market include secured and unsecured loans, Islamic and conventional loans. Secured Loans vs. Unsecured Loans https://unsplash.com/photos/jpqyfK7GB4w Deciding whether to get an unsecured or secured loan is essential when applying for a loan. For secured ones, you need to provide collateral, meaning if you default on the loan, the bank can sell the item to repay itself. Usually, these loans have low-interest rates than unsecured loans. On the other hand, unsecured loans don’t need you to provide collateral to borrow. Therefore, lenders usually impose higher interest rates to ease defaulting risks. Islamic Loan vs. Conventional Loan Islamic personal financing loans follow Islamic banking principles. These loans are usually compliant with Shariah laws, meaning they are interest-free. Due to strict adherence, these loans are generally cheaper, making them more convenient since it has a flat interest rate. Conventional loans are the type of loans most commercial banks offer their customers. Unlike Islamic loans, conventional loans come with high interest rates and are sometimes expensive. Also, some conventional loans don’t have government insurance coverage. Factors Banks Consider When Offering Personal Loans https://unsplash.com/photos/lCPhGxs7pww When banks and other financial institutions offer loans, they check different aspects of their customers. Some of the considerations include; Income: To qualify for a personal loan in Malaysia, banks will check your income level. Usually, the banks use your income to determine the amount you can borrow. The higher the payment, the more you can get. Besides, if you have a savings account with the bank, it can increase your loan limit. Age: For anyone applying for a personal loan, it’s a requirement that you should be an adult. Specifically, you must be over 21 but not older than 60 in Malaysia. Credit History: Before offering a loan, a bank or cooperative must obtain your credit history and credit score rating from CCRIS. Building a good credit rating for 12 months before a personal loan application is fantastic since it can help you get a higher loan limit when lenders check your credit report. Debt Service Ratio: When applying for a loan, banks will consider your DSR. This is your ability to service your loan based on your salary and acts as a gauge of how healthy you are regarding monthly repayments using your monthly gross income. Employment Status: Job status is another factor that banks check during the loan approval process. Freshly employed people might be unable to access loans since banks require one to be employed for at least 6 months. What Are the Eligibility Criteria for Personal Loans? Are you eligible to get a personal loan? Well, there are criteria that financial firms use to assess and determine your loan eligibility. Some of these criteria include general, specific, and special measures. General Eligibility Criteria These are the general rules that all or most lenders will check when offering loans. They cut across all the industry and include the following. Gross Monthly Salary One of the things that banks in Malaysia check when determining when you apply for a personal loan is gross monthly income. Many banks require you to earn at least RM 1,000 monthly to qualify for loans. Depending on your gross monthly salary, a bank can determine how much you will borrow. https://www.pexels.com/photo/unrecognizable-man-holding-wallet-with-money-4386421/ Credit History and Score Regardless of how much you earn, banks rely on your credit history and score to determine your creditworthiness. By referencing your credit history, they can categorize you on the correct risk scale and determine an amount you can borrow. Usually, the credit score in Malaysia runs from 300-850. To be safe, ensure you have a good credit history above the national average of 663 – 678. Employment Type The type of employment is another factor that banks and other money-lending organizations will check. Permanently employed employees tend to have easier access to loans than unemployed people. Besides, the firm you work for can also boost your personal loan eligibility. For instance, people working in reputable firms tend to have an easier time applying for loans than newly incorporated firms. Age Your age is a determinant when applying for loans. It determines the amount you can get, repayment tenure, and interest. Most people below 30 get lower loan limits and higher interest. The same applies to individuals 60 years and above due to increased risks. People around 30-50 years get the best deal since banks deem them stable and experienced in their work hence more safety and ability to pay their loans. Ability to Demonstrate Additional Income Sources Being employed is just one of the qualifications that banks check when determining eligibility for a personal loan. However, if you want more funding than your salary can secure, you need proof that you can pay. The ability to show a lender and prove you own other sources of income can boost the borrowing limit. The more verifiable sources, the higher the chances of getting a loan. Specific Criteria for Different Banks https://www.pexels.com/photo/focused-man-working-with-female-colleague-in-office-5325104/ Although general evaluation measures are standard in all banks, some are specific to each bank. They will dig deeper into details like personal bank statements and others to determine your loan eligibility. Special Considerations Apart from the regular criteria banks use to determine loan eligibility, special considerations also apply. Some of the most common unique concerns that banks consider are; Unemployed Individuals Well, unemployed people can get personal loans in Malaysia. However, banks have stringent mechanisms to ensure that even unemployed people access loans. Some of these requirements might include collateral or guarantors. Before you apply for a loan as an unemployed person, it is essential to check that the loan provider offers ideal interest rates. If you hit a dead end, you can switch to other sources to get the needed money. Some of the best alternatives to source money for unemployed people in Malaysia include; Family and friends: It’s the most accessible loan since repayment terms are easy and can be renegotiated. Crowdfunding: This involves raising capital from fundraisings to finance a project. You can use this means to start an investment or start-up company. Government programs: Government of Malaysia offers different loans and grants for small businesses. You can take this advantage and apply for these loans since it’s not demanding as regular personal loans from banks. Malaysians Working in Singapore If you are working in Singapore, you can still enjoy a personal loan. Some banks allow workers in neighbouring countries to access the best personal loan. But, you need to provide the necessary documents required by individual banks. Some of the common requirements during the borrowing process include; Minimum monthly income Be over 21 years old Passport and work permits Bank statements for a specific duration Self-employed Apart from the employed and unemployed, there is another self-employed category. These are people who own businesses and other forms of jobs that aren’t government or corporate. If you are self-employed, can you access a personal loan in Malaysia? Yes, you can, and many banks and other lenders have this option. While finding g a personal loan might be more accessible for self-employed, it is still more challenging than for employed people. To access a personal loan as self-employed, you must have a saving account with your lender. This will prove that there are minimal risks if you fail to pay. Other requirements include proof of income that shows your income for a specified time. Once you provide these, you are ready for a loan application. Applying for a Personal Loan in Malaysia https://www.pexels.com/photo/crop-businessman-giving-contract-to-woman-to-sign-3760067/ Before applying for a personal loan in Malaysia, the first thing is to ensure you have met all the requirements. If you aren’t sure, you should visit your bank branch and inquire from them. Alternatively, most banks and other lenders have online platforms where you can engage with their customer care staff. Once qualified, here are the steps for loan application: Step-by-Step Guide to Applying for a Loan Like inquiries, applying for a personal loan in Malaysia can be done offline or online. However, it depends on the personal preference. Whether you like online or offline, the two processes are explained in detail below. Offline Loan Application Offline loan application is one of the most common ways people apply for a personal loan. The process involves visiting the bank in-person to deliver your hard copy forms. One of the benefits of offline applications is that when returning your papers, you can interact with bank staff. Therefore, seeking solutions from a bank branch representative is easy if you have any questions or issues. The downside of the offline application process is that the process can be time-consuming and overwhelming. This is because downloading and taking forms to a bank branch can be tedious. To apply for a personal loan offline, this is the process. Visit the lender’s branch. Get the necessary application forms and complete the filling process. Submit the full-filled documents to the lender. The lender will check and verify your documents(it might take some time); if you qualify, the loan is processed. The Next step is crediting money to your bank account. Online loan applications The rise of online banking has eased how people can access loans. It’s now easy to apply for your personal loan paper free. The method offers excellent benefits since you don’t need to travel to the bank to present your forms. The process solely relies on websites or bank apps. The process of online personal loan application is as follows. Log into your lender’s website. Navigate to the loans page, choose the personal loan, and click ‘apply.’ The system will prompt you to fill in the necessary details. Once done, the lender will assess the provided information to determine your eligibility. If you are eligible, the bank will credit your bank account with your loan money. Documents Needed When Applying for Personal Loan For successful personal loan approval, the applicant must provide all the documents requested by the lender. https://www.pexels.com/photo/illustration-of-credit-concept-with-money-6289033/ Some of the vital documents you need to provide include. 1. Loan application forms 2. Identity verification documents Birth certificate Driver license Military ID Social security card Passport 3. Employer and income verifications (unsecured loan) Business registration Tax returns Bank statement Experience certificate 4. Proof of residency Utility bills Mortgage statement Property tax statement Lease or rental agreement 5. Age proof Id card Birth certificate Driving license Personal Loans Fees and Charges https://www.pexels.com/photo/a-close-up-shot-of-an-agent-pointing-rates-with-a-ballpen-8292880/ If you are applying for a personal loan, it’s worth knowing that there are some involved charges like the ones highlighted below. Processing Fee These are charges that lenders charge to cater to administrative costs during loan processing. The processing fee ranges from bank to bank. Early Settlement Fee This is the money paid if you settle the loan before the stipulated date. The bank and customer can negotiate the early settlement fee for the best deal. Early settlement usually doesn’t affect your credit score rating. Late Payment Fee A late payment fee is a penalty imposed on customers who fail to repay their loans on time. These fees differ from one lender to another but must be reasonable and explained to the borrower. The fee is the opposite of the early settlement fee. Late settlement usually affects your credit score rating even if you are charged a late settlement fee. Loan Interest Interest rates are the charges lenders charge borrowers for the money loaned, always in principle percentage. There are different types of interest rates available that lenders can use. While these charges are common, some banks in Malaysia have eliminated some charges. This is due to stiff competition giving customers great reprieve. Personal Loan Tools and Tips https://www.pexels.com/photo/woman-holding-a-paper-3727463/ Personal Loan Calculator Before applying for a personal loan, deciding its purpose is important. This will allow you to calculate the needed amount without adding excessive amounts. Remember, a loan requires great commitment and can significantly affect you if there is poor management. That is why personal loan calculators are essential tools. Usually, a personal loan calculator is easy to use to calculate the amount of loan interest to pay, equated monthly repayment, and other loan components with a single click. You only need to put the figures, and the calculator will do the calculation work for you. Knowing the status makes it easy to manage your finances and service your loan efficiently. There are many benefits associated with using this calculator, such as; Always available to use for free Accessible to all people without the need to download There is no sign-up, phone number, or email needed to use personal loan calculators are excellent for assisting in financial management Tips to Increase Approval Chances for Personal Loans Everyone dreams of applying for a loan and getting it approved without issues. But, sometimes, this is not always the case since you can get loan application rejections. Some common issues that can cause a lender to reject applications include job instability, unqualified applicants, many pending loans, and low income. https://www.pexels.com/photo/person-holding-gray-twist-pen-and-white-printer-paper-on-brown-wooden-table-955389/ To improve your personal loan eligibility, you need to follow these tips. 1. Boost Your Credit Score Boosting credit scores is one of the ultimate ways to increase the chances of loan eligibility. To improve your score, the secret is to ensure timely payments of your unpaid balances. By doing so, your credit score will build your rating and increase the chance of fast loan approval. 2. Use Loan Calculators Before applying for a loan, using a personal loan calculator to calculate your eligible loan amount is advisable. This will allow you to apply for a loan based on correct prediction. Evaluating a loan before applying makes it easy to determine the most convenient repayment approach and plan for monthly repayment. 3. Look for Loans with the Least Interest One of the ways to get banks lending money with the lowest personal loan interest rate is by using loan comparison tools. The tools can give you a variety of credit unions, banks, and other lending institutions so that you pick the best suited for you. Selecting the best deal saves you extra cost by paying less monthly repayment interest rate. 4. Always Provide Correct Information When applying for loans, a slight error can cause your loan application rejection despite fulfilling other requirements. Thus, double-checking helps to detect and rectify any mistakes when filling out the forms. If you have passed all the checks, submitting accurately filled forms is the last step to getting your personal loan approved. 5. Determine the Amount You Need Personal loans need proper planning to avoid draining you beyond your capacity. Therefore, determining the amount you need before applying is essential. The bigger the loan, the more interest you will pay. Therefore, as you decide the amount, check the interest rate, duration, and other fees to determine the total amount. Considering these will help you plan for what you can afford and your monthly repayment. Avoid Too Many Loan Applications Sometimes, people are tempted to apply for personal loans in different banks at a go. However, you might not know that banks can request your debt profile from other banks. Therefore, too many pending loan applications can serve as a red flag and make banks reject your applications. Thus, ensure you apply for one loan at a time to minimize the chances of rejection. Common Questions and Misconceptions About Personal Loan https://unsplash.com/photos/LDcC7aCWVlo FAQs Which bank is best for taking a personal loan? The best bank for personal loans offers the least interest rates. Some of the best personal loan banks with the lowest rates in Malaysia include Bank Islam and HSBC Amanah. The lower interest rates make their loans cheaper compared to others. Who is the easiest to get a personal loan from? If you are applying for a loan in Malaysia, some of the fastest banks to approve loans include CIMB, Moneybank, ALlinance Bank, and RHB, among others. These lenders have an average duration of day approval and disbursement of borrowed money. Who offers the cheapest personal loan? For cheap personal loans, some leading banks include Alliance Bank at 4-15%, HSBC Amanah at 4-10%, Al Rajhi Bank at 6-12%, and CIMB at 6-15%. The rate of interest depends on various factors. How much is a 10k personal loan? The cost of a RM 10K loan in Malaysia, when calculated using a personal loan calculator based on the lowest personal loan interest rate rates available in Malaysia of 4.99% per annum, will cost a total of RM 272. The monthly payment will be RM 856 for 12 months. What is the credit requirement for a personal loan? The credit requirement to borrow a loan depends on the lender and your savings account amount. Each imposes the lowest amount of credit you must have to access loans. Besides the lowest amount, the amount of loan based on credit also differs from one lender to another. Besides, one needs to have a high credit score to access loans. How do I approve a personal loan? Approving a personal loan is a process. To get your loan approved, you need to apply, get your application approved, and have money disbursed into your bank account. Does everyone get approved for a personal loan? Not everyone’s loan amount gets approved. If your credit score is poor, you have not attained the required age, or doesn’t meet the set bank criteria; your loan won’t go through. What is the easiest type of loan to get? Well, there are different types of personal loans. Unsecured ones are easy to access since banks set fewer conditions than secured and other kinds of loans. What are the eligibility and inclusion criteria? Eligibility criteria is a method that banks use to determine whether you qualify for a loan amount or not based on the set parameters. On the other hand, inclusion criteria determine who can or can’t access the loans based on the standards in place. Why use eligibility criteria? The eligibility criteria in bank loan applications are important since they allow banks to assess creditworthiness. Using the process makes it easy for banks to identify high and low-risk borrowers and apply the correct measures when issuing a loan. High-risk borrowers get low limits, while low-risk borrowers get high loan limits. Personal Loans Myths and Misconceptions There are many myths and misconceptions regarding personal loans. But are they true? https://www.pexels.com/photo/person-counting-cash-money-4475523/ Let’s debunk what is a myth and a fact. 1. You can only get a personal loan from a bank This is not true, as different financial institutions offer personal loan. Some of these lenders include credit unions, cooperatives, among others. Therefore, you can get a personal loan from various institutions besides banks. 2. Only employed people can access these loans Most people think that only salaried employees can access personal loans. However, unemployed, self-employed, business people and freelancers can access these loans. A financial institution must only confirm your creditworthiness to avail of the principal loan. 3. Low credit score results to loan request rejection Although essential, a credit score doesn’t mean a low rating will result in direct rejection. It’s worth noting that lenders also consider your income level and document authenticity, among others, to award a loan. Banks won’t reject your application if you are deemed fit for personal financing and loan servicing. However, it’s worth noting that maintaining a high credit score is essential. https://www.pexels.com/photo/a-man-in-gray-long-sleeves-sitting-at-the-table-7534774/ 4. Personal loans have high-interest rates Contrary to many beliefs, a personal loan doesn’t attract high-interest rates. Considering various factors, these loans are cheaper and more flexible than conventional ones. 5. A Personal loan takes a long time to approve. A personal loan is one of the easiest and fastest processed loans compared to other types. Since requirements are few, some banks take only one day to process these loans. Conclusion Personal loans are the solutions to finance your project and access emergency funding. They are some of the easiest and most quickly processed loans for employed, self-employed and business people. Being among the least demanding personal loan, interest rates are usually lower, making them appealing to many borrowers. Further, lower monthly instalment servicing eliminates loan repayment hassles. With different financial institutions offering personal loans, applying to your preferred lenders is possible. Whether you prefer banks, credit unions, finance companies, and cooperatives, they make access to loan services convenient. Also, accessing these loans are a fantastic way of personal financing for salaried employee and unemployed individuals. While this guide tries to offer insightful information regarding personal loans, it’s vital to always seek professional advice from your bank or financial services provider. This will allow you to evaluate your finances and make sound decisions based on your needs. Besides, a reliable financial consultant can guide you to achieve financial success.