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Thursday, January 7, 2021

Compare the personal loans with lowest interest rates in Malaysia and get the lowest monthly repayment

                   


How does personal loan work?

Put simply, a personal loan is a sum of money with interest lent by the bank to a borrower for a fixed period. The loan must be paid back in fixed amount installments, every month until the end of tenure.

It is quite straightforward until you come across some terms and jargons that you are not familiar with. Don’t worry, here are some commonly used terms to describe personal loans:

Compare Malaysia Bank Interest Rates for Bank Loans


TermsDescriptions

Per annum (p.a.)

The interest rate will be charged on a per-year basis. If a RM10,000 loan is at 5% p.a. interest, the interest charge is RM500 per year. 


Now, if the repayment tenure is stretched to 3 years, the interest will become RM1,500 (RM500 per year x 3 years).

Principal

The amount of loan you applied for. The interest rate will be calculated based on this amount and added on top of it. Going with the example above:

Principal + Interest = Total Borrowing Amount

RM10,000 + 5% p.a. =RM10,500

Interest rate

Interest rate is charged on the loan amount by the bank to the borrowers for using its money. 


It’s the same concept as deposit; you put money in a savings or current account, the bank will pay you interest or profit for using your money.

Tenure

The loan repayment period. Choosing the right tenure is important for your personal finances.


Shorter loan period comes with higher monthly installment amount, whereas longer loan period comes with higher interest rate.

Period

Shorter

(1-3 years)

Longer 

(4-10 years)

Interest Charge

Low


RM10,000 x 5% x 1 year 

=RM500

High


RM10,000 x 5% x 10 years 

=RM5,000

Monthly Installment

High


RM10,500 ÷ 1 year 

=RM875 per month

Low


RM15,000 ÷ 10 years 

=RM125 per month

Installment

You need to pay back your personal loan every month until the end of tenure. 


Installment amount is fixed, which is calculated on the total borrowing amount then is divided by the total numbers of months.

Penalty

This is a fee a bank will charge on your overdue amount for being late on your repayment.

Default

The term to describe an event of non-payment of a personal loan for over 3 months.


In this situation, the bank will usually impose a higher finance charge and/or take a legal action against you.


Under this circumstance, you will face difficulty in securing any loans in the future as a result of poor credit score.


In fact, your repayment history will stay in CCRIS database for up to 12 months.

Article source: RinggitPlus Malaysia

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