How Much Money Can I Borrow?
This will depend on your needs, as well as your eligibility. With banks, you can borrow up to X amount that comes with a much longer tenure. This is possible because they have other services offered i.e. savings accounts and fixed deposits to keep the businesses rolling.
As for the licensed moneylenders, you are still able to borrow a sum amount of cash like RM10,000 or RM5,000, but not as much as the banks, which can be up to RM150,000. This is because their capital isn’t as big and they focuses on smaller loans.
What About the Interest Rate?
Just so you know, a good loan is one with lower interest rates because it lessens the payment of the total amount. For banks, there is a wide difference between the lowest and highest interest rates offered in Malaysia and they’re charged on a flat rate basis. It can be as low as 4%; and as high as 7.54%. You can check the latest interest rate here.
When it comes to the legal moneylenders, they actually have laws on how they can charge interest, unlike the Ah Longs - this is great to prevent any nightmare situations. According to the Moneylenders Act 1951 (MA), they can only charge a maximum of 12% interest per year for secured loans and 18% interest a year for unsecured ones. Basically, the rates are higher than what the Ah Longs are charging but not less than the banks.
How Do They Check My Credit History?
Before approving your loan, the banks will usually go through your past payslips, payment history, credit facilities and other financial details to see if you’re creditworthy. This is a standard process to make sure that you’re eligible for the loan and also a good paymaster.
The same process will be done by the license moneylenders as well - payslips, bills and other financial info. However, they don’t do a detailed risk assessment for you to take the loan from them, as long as you don’t have a bad credit - all is good. This means that their approval rate is high. Definitely a plus point if you need the money fast.
When Can I Get the Money?
Most of you may already know that it takes awhile for banks to give you your money. That being said, some banks do advertise fast loan disbursement but it will still take about 5 working days to transfers the funds to your account.
This is not the case with the moneylenders. You can expect a much shorter time compared to the banks because their businesses solely focus on delivering the cash.
What Happen When I Make Late Loan Repayment?
First of all, it is highly advisable to not make late payment as it is costly and will cause you a lot of hassle. For banks, you will need to pay the late payment fee. If this matter continues, the banks have the right to increase your interest rate. Although not all banks impose such practice, most do. Apart from that, you will have problems applying for other loans or financial services in the future.
Licensed moneylenders, on the other hand, are not allowed to use compound interest or increase the interest amount when you don’t pay on time. This is based on Section 17(1) of the MA. It is said that you’ll be charged a simple interest based on the outstanding amount. If things are getting out of hand they will send you reminders, send debt collectors to get the money, issue letters of demand, and even blacklist you on credit rating agencies like CCRIS and CTOS.
How Now? Bank or Moneylender?
Well, looking at the differences, taking a loan from the moneylenders may seem like a good idea when you need fast money. However, we would advise you to take the loan from the banks as the process is much more transparent compared to the licensed moneylenders. But, this decision is entirely up to you.
That aside, to those who are in the midst of looking for a personal loan from the banks, you can check out this comparison tool from Loanstreet to see which banks offer attractive packages. You can do the same with housing loan too!
Side note: If you’re going for the legal ‘Ah Long’, do make sure the business is properly licensed. You can do this by cross-checking the company's SSM number on the Ministry of Urban Wellbeing, Housing and Local Government (KPKT) website.