Credit Cards & Loans
Best Personal Loans in Malaysia – How To Get The Lowest Rates
Need some extra money and thinking about a Personal Loan? Should you even get one? When should you use credit card debt or take out a personal loan? All questions answered here in our guide.
What is a Personal Loan?
Personal loans are a type of consumer financing provided by lenders (banks, moneylenders etc.) to assist consumers with short term shortfalls in personal finances, be it for purchasing big items, family, or other household large expenses. Such loans are either unsecured, or secured by the asset purchased (collateral) or by a related person who acts as the guarantor.
A personal loan is usually charged a flat rate interest rate (on any financing amount or loan tenure, more on flat rates below), the rate is typically tiered based on loan financing amount or loan tenure. All accrued interest is payable as part of monthly instalments and these monthly repayments are to be paid until the end of the loan tenure to clear off all the accrued interest and the principal amount. In Malaysia, only banks, financial institutions and licensed money lenders can provide personal loans to consumers (legally anyway).
Licensed Money Lenders in Malaysia
In Malaysia, there are almost 3,000 registered money lenders who provide personal loans to consumers. Those money lenders are actually licensed by Ministry of Housing and Local Government (no, we don’t know why they aren’t licensed by the Ministry of Finance). If you unable to get a loan from a bank, this can be your alternative for financial help. The usual interest rates are 12% p.a. flat for secured loans and 18% p.a. flat for unsecured loans. These rates are the maximum allowed rates under Money Lenders Act 1951. There is a governing association for money lenders, the Malaysian Licensed Moneylenders Association (MiLMA). Their existence is to keep licensed moneylenders in check, but they also exist to assure the public that money lenders are not “loan sharks”, but are running registered businesses which provide a safe alternative to borrow money, where recovery of debt is done through legal (rather than murky) channels.
Key things to Note on Personal Loans
Flat Interest Rates
A flat rate means that interest is charged on your full principal over the tenure. The cost for a flat interest rate loan product is easy to calculate : multiply the rate with the number of years and the initial amount borrowed (principal amount). Flat rates almost always understate the amount of interest you pay, and a flat rate to effective interest rate conversion is normally required to compare flat rates to other types of interest rates (especially those offered in Mortgages and Credit Cards). For more, you can read out Flat vs Fixed vs Variable Interest Rates article.
Early Repayment Penalty (or Rebate, but just a different way to look at it)
Reducing your overall debt level may be on the forefront of your mind. Hence, you may think that it would be a great idea to pay back your personal loan before the end of its tenure should you have spare funds available. However, you need to be aware that some loans may have early payment charges. This occurs because the loan providers make their profits by charging interest on your loan. If you clear it early, the lender would not get as much interest as they would have had you held the loan to the full tenure. Hence, to make sure that the loan arrangement is still profitable even if early repayment occurs, the lenders will include an early repayment penalty into the loan agreement. Be sure to look carefully at the terms and conditions of the loan agreement to check the rate charged on the early settlement. For example, UOB Bank charges a 3.0% early repayment penalty on the outstanding sum, subject to a minimum of RM300 for the notice period in lieu of 1 month’s written notice. Some banks might offer lower rates, so be sure to do some research.
In the conventional banking system, consumers only have to pay the outstanding principal amount and interest at the point of early settlement (in addition to the early settlement penalty). However, consumers under the Islamic banking system have to settle the total outstanding selling price in the case of early settlement. The consumers are also provided a rebate to maintain the competitiveness of Islamic banking. This concept, accepted in Syariah principle, is called ibra’. For clarification on the difference between penalty and rebate, have a look at the example below:
Amira borrows RM10,000 from UOB Bank with tenure 5 years and interest rate 10% p.a. At the end of the tenure, Amira should have repaid RM15, 000 with the interest charges. However, assume she wants to pay it early at the end of year 3. Early settlement penalty of 3% on outstanding sum is applied at bank. Amira has already paid RM4, 000 of her principal amount and RM2, 000 in interest charges. So, at year 3, Amira only needs to pay RM6, 000 of the remaining principal amount plus 3% on the outstanding amount.
If Amira borrows the same amount from OCBC Bank with same interest rate. Instead of an early settlement penalty, she gets a rebate @ ibra’. Amira should pay full RM9, 000 at year 3 if she wishes to have early settlement. However, the bank will offer a rebate as calculated in the formula below:
Ibra’ = {n (n + 1)/ T (T + 1)} x P, where n=number of monthly instalments remaining, T=Financing tenure, in months and P=Interest payable over the entire financing tenure
So Amira will receive rebate of RM1,819.67, so she actually have to pay RM7180.33 only at year 3.
Hong Leong Bank applies another formula:
Rebate = {(n-3) (n-2) x I}/ {N (N+1)}, where
n = Number of Monthly Instalments over the unexpired period
N = Loan Term
I = Interest payable for the whole Loan Term (RM)
In actual fact, this is the same as the previous formula because Hong Leong Bank required 3 months advance notice if you opt for early repayment. The formula will be applied on the day you give the notice, whereas the previous formula is counted on the day of early settlement payment.
Late Payment Charges
This amount will be charged to your personal loan if monthly instalments are not paid on time. For example, Maybank charges 1% per annum on the amount calculated from the overdue date until the date of full monthly payment. Most banks charge 1% per annum, but it is best to do some research on your own before getting involved in a loan agreement. Above all, ensure that you are punctual with your monthly instalments to avoid these extra charges.
Failure on Repayment
After a specified number of payments, if you are unable to pay back the principal amount and the interest charges of the loan, there are two possible consequences. One, the bank has the right to take legal proceedings against you; Two, the bank can set-off any credit balance in your account (maintained with the bank) against any outstanding balance in the loan account. If the personal loan is a secured loan, the lender can repossess the collateral or claim the outstanding amount from your guarantor. Take heed that failure to repay will harm your credit rating. It will make it difficult or almost impossible get a loan in the future.
Collateral or Guarantor
A personal loan pledged with collateral or guarantor is called a secured loan. Collateral is when you fix your property or any fixed asset against the sum of money borrowed. In the event of failure on repayment, the lender will take the property attached to the loan to reimburse your outstanding amount. Personal loans in Malaysia normally do not require collateral and it is normally stated on the lenders’ website. Another way for lender to reduce the risk of failure on repayment, is to require a guarantor when you borrow up to certain amount. If failure on repayment occurs, the lender can claim the outstanding amount from the guarantor.
Personal Loan vs Credit Card for Borrowing
If you are borrowing a small amount or require only a short term loan, why not consider a credit card?
If you need a small amount for a short term personal use, using a credit card may be a better option compared to a personal loan, depending on the interest rate and time you need the money for. Although credit cards sound like they have higher interest rates, most of the time they may actually be lower than personal loans (explained below). Moreover, they almost always provide a more flexible repayment schedule where you can pay the balance earlier or later without penalty (as long as you make the minimum repayments). Some banks even offer credit cards which have an easy payment plan at 0% interest rate for certain purchases.
My credit card’s interest is 12% p.a. and I have been quoted a personal loan at 9% p.a., how can you say the interest costs are lower on a credit card?
Remember that personal loans are typically charged on a flat interest rate on full amount policy, the interest rate charged on credit cards are fixed interest rates based on reducing balance. Once you have spare cash and you pay a portion to the balance, interest will be recalculated based on the remaining balance. With a personal loan, whether or not you pay extra somewhere in the middle of the loan tenure, the interest is still calculated on the principal amount. As such, depending on the rates a credit card is a better option providing that the amount you need is not over the credit card limit.
Let see the example below:
Patrick borrows RM10,000 from a bank (under personal loan) at a flat interest rate of 9% p.a. for one year
The total payment at the end of 1 year = RM10,000 x 1.09 x 1
= RM10,900
However, if Patrick applies for a credit card with an average rate of 12% p.a. on reducing balance (assuming he can get a limit of RM10,000), the total payment (assuming 12 equal payments) for the year is only RM10,661.88 which is RM238 less than the personal loan over the course of the 12 months.
How do I know if using a Credit Card is better than getting a Personal Loan? Try comparing the rates (and the lower one is better), be sure to convert the Personal Loan rate into an Effective Interest Rate first though, using this calculator:
Top Personal Loans in Malaysia
Rates for Civil Servants and GLC staff are typically (quite a bit) lower than that for everyone else (private sector employees, self employed, etc.), we split our top tables comparison between these two groups of applicants. Also, the final rate that you may receive will depend on your own individual circumstances, so be sure to check the rate that you will be getting before signing on any dotted lines!
Personal Loan Quick Navigation
For Civil Servants and GLC staff : Short Tenures
For Civil Servants and GLC staff : Longer Tenures
Top Personal Loans in Malaysia for Everyone Else: RM100,000 or more
The Top Personal Loans in Malaysia for Everyone : RM50,000-RM100,000
The Top Personal Loans in Malaysia for Everyone: less than RM50,000
For Civil Servants and GLC staff : Short Tenures
Bank Rakyat – Personal Financing-i Aslah Mega – 3.25% flat p.a. for Civil Servants and GLC employees
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Specially for civil servants and employees of government-linked companies (GLCs)Profit rate: How to pay back: Listed Features:
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Go To Bank Rakyat |
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Bank Rakyat provides a personal loan package for civil servants and GLC’s staff who are Malaysia citizens, aged from 18 to 60 years old with the minimum salary of RM1,000 per month and employment at least 6 months.If you are a Bank Rakyat member, you can exclusively enjoy the lowest rate in the whole market. You can simply do this by signing up and applying for one of their deposit accounts. |
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Public Bank – BAE Personal Financing-i
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Specially for permanent staff of government, statutory bodies and Public Bank approved agencies (with service at least 6 months).Profit rate: How to pay back: Listed Features:
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Go To Public Islamic Bank |
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Public Islamic Bank provides hassle-free and quick cash personal loan for government staff who are Malaysia citizen aged 18 years and above being a permanent staff of at least 6 months in service.Besides, Public Islamic Bank provides free protection without Takaful premium and offer more cash without security deposit. |
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For Civil Servants and GLC staff : Longer Tenures
Bank Rakyat – Personal Financing-i PRIMA Aslah
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Specially for Civil Servants onlyProfit rate: How to pay back: Listed Features:
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Go To Bank Rakyat |
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Bank Rakyat provides quick cash for government staff who are Malaysian citizens, aged from 18 to 60 years old with the minimum salary of RM1,000 per month and under employment for at least 6 months. |
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CIMB Islamic Bank – Pembiayaan Peribadi Sektor Awam-i
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Special financing package tailored only for government servants and employees of government linked companies (GLCs).Profit rate: Listed Features:
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Go To CIMB Islamic Bank |
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CIMB Islamic Bank provide personal loan to individual aged between 18 and 58 years upon application with minimum salary amount of RM500 (basic + allowances). This product is open to all government servant. The promotion rates is valid until 31st December 2012.You can pay the Installment payments via salary deductions through Biro Angkasa. |
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Top Personal Loans in Malaysia for Everyone Else: RM100,000 or more
RHB Bank – RHB Personal Financing – low rates and 1% cash back until 30th September 2012
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Special financing package tailored only for government servants and employees of government linked companies (GLCs).Profit rate:- 8.18% p.a flat rate (Financing Amount of RM100,000 to RM150,000) Interest is charged upfront on the loan amount.
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Go To CIMB Islamic Bank |
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RHB Bank provides up to 5% in cash rewards with this personal financing product and insurance is needed.The rates stated above are based on a flat rate and vary according to the repayment period from 12 months onwards.The actual rate charged however will be calculated on a monthly reducing balance rate. (effective interest rate or EIR).Tier 1: from 13.45%p.a. flat that is equivalent to EIR 24% p.a;
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The Top Personal Loans in Malaysia for Everyone : RM50,000-RM100,000
CIMB Islamic Bank – Cash Plus Financing-i
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Profit rate:- 6.88% p.a flat rate (Financing Amount of RM50,000 to RM100,000) How to pay back:
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Go To CIMB Islamic Bank |
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CIMB Islamic Bank says they provide the fastest and the most flexible financing up to 5X to your gross income and get approval within 24 hours.Malaysia citizen or permanent resident with single name application, aged between 21 and 60 years upon application, minimum income RM2,000(basic + fixed income only) and employment / business for more than 6 months. |
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The Top Personal Loans in Malaysia for Everyone: less than RM50,000
Maybank – Maybank Personal Loan
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Profit rate:- 9.00% p.a.flat rate (Financing Amount of RM50,001 to RM100,000)
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Go To Maybank |
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Maybank provide hassle-free, fast approval and fixed monthly instalment personal loan with no document stamping and insurance protection is needed. You even can earn TreatsPoints for every Ringgit Approved.Individual Malaysian Citizen aged between 21 to 60 years old with minimum income of RM30,000 per annum is eligible to apply. |
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Standard Chartered Saadiq Bank – Personal Financing-i
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Profit rate:- 10.22% p.a flat rate
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| Go To Standard Chartered Saadiq Bank | |
Standard Chartered Saadiq Bank provides quick and hassle-free personal loan. Available to all Muslims and Non-Muslims in Malaysia |
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Tagged credit cards, flat rate, flat rate financing, personal financing, personal loans
