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The Real Consequences Of Not Paying Back Your PTPTN Loan

Updated 19 Oct 2018 – By Loanstreet


Undeniably, PTPTN loan is one of the most generous government education loan schemes available in Malaysia today. Since it was launched back in 1997, it has been providing loans to more than 2 million students. With the flat interest rate of 1% p.a. only, students are benefiting from exceptionally low repayment amounts as compared to other available education loans offered by banks, whose interest rates are significantly higher.

Notwithstanding the fact that the interest rate is intentionally kept low to make education affordable for everyone, the abusive phenomenon has grown wildly among those PTPTN borrowers who successfully graduated from Malaysian universities. In this case, a large majority of the graduates tend to defer repayments indefinitely, with quoted reasons such as having low salary, unresponsive administrators, as well as tedious procedures and annoying paperwork.

In this regard, statistics show that the collection rate of the outstanding PTPTN loans fall at just 46%. The staggeringly huge number of defaulters have left PTPTN with no choice but to introduce strict measures against these defaulters. Generally, before any actual measures being enforced, a total of three warning notices will be sent within a six month grace period. After the defaulters’ names are disgracefully blacklisted, it will further impact on their stay in Malaysia.

In this article, we will show you the actual measures taken by the authorities to penalize you should you default on your repayments.

  1. Automatic salary deduction

    This measure is relatively new and has been the subject of many long discussions among PTPTN officers. Starting from September 2015, all of the civil servants who have not or are inconsistent in making payments to PTPTN are required to repay PTPTN loans via automatic salary deduction. The repayment amount is subjected to the income level of the defaulter. Nonetheless, no payment will be deducted from the salary if it has not reached a certain minimum salary level. Once the defaulters are streamed into this scheme, they will not be able to escape from it until the loans are fully paid back, unless they have stopped working or declared bankrupt.

  2. Barred from leaving the country

    Travel bans will be imposed on individuals who missed repayment schedules. If these defaulters being banned from leaving the country, they literally will not be able to pass through the immigration checkpoint. Apart from not being able to leave the country, the defaulters may not be able to renew passport until the bans were being lifted.

    However, the names of travel-banned individuals will not be disclosed publicly. To check whether your name is on the blacklist, proceed to the immigration department’s website (immigration control status checking) to verify your status.

  3. Blacklisted on CCRIS database

    Beginning 2015, PTPTN defaulters have been put under close scrutiny while serious defaulters are being blacklisted on the CCRIS database. To understand how this affects your ability to finance your assets in Malaysia, you need to know how CCRIS works.

    A CCRIS report reflects your credit score and the most impactful feature is that this database is being shared among all financial institutions. Unfortunately, for banks to distinguish between good borrowers and bad borrowers, credit history is the most important element to be taken into consideration. Therefore, regardless of whether or not a person is being blacklisted on CCRIS database, the credit report will be constantly reviewed by bank whenever an application is made to borrow. So for all blacklisted individuals, forget about getting personal loans, car loans, home loans, business loans or even credit cards, because the bank already has a valid reason to reject their applications instantly.

    Unsurprisingly, a big number of the defaulters actually understand the consequences of being blacklisted on CCRIS database. It was reported that PTPTN loans daily collection amount increased by almost triple after the blacklisting announcement was made.

    On the bright side, the defaulters can improve their CCRIS reports by repaying the PTPTN loans consistently as the reports only show recent 12 months of credit histories. Therefore, any negative history will not be shown in their CCRIS reports after they have made consistent repayments for at least 12 months.

  4. Legal action

    Taking the defaulters to court might be the most serious action taken by PTPTN as you can imagine. Most likely after this, they will be forced by the court to repay the loans coupled with additional legal fees every year in a consistent manner. However, in order to end up like this, they must have ignored all the warning notices sent by PTPTN and taken no action in responding to the debt. Even when they receive the court summons, they can still schedule a meeting with PTPTN to negotiate the loan settlement before the court hearing takes place. Many court summons with regards to PTPTN loan are in fact cancelled because of this settlement. Nevertheless, to make things worse, if they still refuse to repay the loan after the court order has been made, the authority is obliged to take their assets away, subject to certain limitations.

Conclusion

As a matter of fact, we strongly advise all PTPTN funded students not to treat PTPTN as a form of scholarship. PTPTN was set up to lend money to all Malaysian students to further their study with incredibly low interest rate.

Due to this growing number of defaulters, it will escalate more distressing requests to discontinue PTPTN education loan scheme. Looking at the long term benefit, we would not want to see the next generation of students suffer from insufficient educational fund without the help from PTPTN as it is still the best study loan available to Malaysian students. Therefore, this beneficial education loan scheme will only be sustainable when it is not being abused by the past and the current generations.

Don’t miss our Top 6 Questions About PTPTN to learn more.

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