Avoid The Pitfalls Of Personal Loans

  • 14 Nov 2019

Do you know that personal loan is the leading cause that has driven Malaysians into bankruptcy?

Statistics from the Malaysian Department of Insolvency showed over 95,000 individuals have been declared bankrupt between 2014 and 2018, after failing to honour their borrowings with lenders. 

The main cause that dragged them into insolvency were personal loans (27.76%), followed by hire purchase (24.73%), housing loans (14.09%), and credit card (9.91%), according to a report by The Malaysian Reserve. 

What is personal loan?

A personal loan is an unsecured loan from a bank, credit union or licensed money lender, used by a borrower for personal reasons. A borrower has to pay it back in fixed monthly payments. 

Why you should make the monthly repayments on time

Paying back on time improves the borrower's credit score. With a good credit score, applying for a personal loan can get easier (with no collaterals, personal loans are not easy to get).

With a good credit score, a borrower can get lower interest/profit charges on their loan. 

With good credit score, a borrower can also get a higher credit limit, and a peace of mind. 

What happens if you don't make the monthly repayments on time?

When a borrower fails to make the repayments on time, late payment chargs will apply after a 1 month default. 

Is there a solution for defaulters?

Yes there are several solutions. 

Negotiation with banks - A borrower can negotiate the debt down to a large one-time payment

AKPK - The Credit Counselling and Debt Management Agency (AKPK) will be able to restructure repayments through a debt management plan for a borrower to regain control of their loan. 

Asset liquidation - A borrower could possibly liquidate their assets and file for bankruptcy. 

Source : SlideShare/AzharFahruddin,, The Malaysian Reserve
Photo source:,

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