Financial needs for things like education, house, car, or other appliances have become common in many households. In such a situation, taking up a personal loan is one of the most convenient ways to arrange funds. But, how do you prepare yourself for a personal loan? What are the requirements and types of personal loans in Malaysia?

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1.    Types of Loans in Malaysia

A loan is an amount of money borrowed from a bank for a fixed duration with some interest and charges levied on the loan amount. While every loan involves borrowing money, some features separate them.

• Secured loans

When a loan amount requires some collateral like a fixed deposit, house, car, or unit trust on it, it is termed as a secured loan. Along with the collateral asset, a guarantor is also necessary for this type of loan.

• Unsecured loans

An unsecured loan is exactly the opposite of a secured loan and does not require collateral assets or any guarantor.

• Islamic loan

An Islamic loan follows the strict procedures of the shariah contract. One of the main conditions here is the absence of interest compounding in case of an overdue payment. At the same time, the amount borrowed under an Islamic loan can only be used for purposes that follow under the halal category.

• Conventional loans

The loan amount of conventional loans can be used for all activities that are legal in the country. At the same time, an overdue payment can also attract compounding in these kinds of loans.

• Including takaful coverage

Takaful coverage is like insurance on the loan amount. This means that in case of the unexpected death of the borrower, the balance loan amount is covered with this insurance. This makes the loan more expensive due to the inclusion of the takaful amount on the loan amount.

• Not including takaful coverage

This type of loan does not cover the loan amount in case of the unexpected death of the borrower. In this situation, the beneficiary is liable to pay the balance loan amount.

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2.    How to apply for a personal loan?

Loan approval largely depends on the rate of DSR. This rate is based on your monthly commitments and your income. It can be calculated by diving your monthly commitments with your monthly income and multiplying by 100. Nowadays, many lending institutions have loan calculators on their website, that tells you the tenure and kind of loan that you can opt for.

At the same time, there are some documents that you should prepare before applying for a loan. Although required documents can vary depending on the bank or the lending institution, some of the most documents include the application form, passport size pictures, ID proof, residence proof, income proof as well as an employment contract.

The loan approval process will also depend on various other factors like the income type, age, nationality, and the credit score of the individual. The credit score can be easily checked with the help of privately-run credit rating agencies like CTOS.

3.    Some common personal loans in Malaysia

Many lending institutions are offering both offline and online means to borrow money conveniently. You can expect to get a loan of RM 10000-RM150000 from Al Rajhi Bank with an interest rate of 3.84%. You can expect the loan duration to be in between 2-8 years provided the minimum monthly income is RM3500 or more.

Alliance bank provides an interest rate between 3.99% to 8.38& p.a on loan amounts up to RM200000. The minimum monthly income requirement is RM 3000 with a loan duration of 2-8 years.

Pertama is another option with loans up to RM 200000 and includes taka on the loan amounts. You can avail of this loan if your minimum monthly income is RM 2000 on an interest rate starting from 3.65%.

Direct Lending is another lending institution that provides quick loans for rates beginning from 2.69%. The loan duration begins from one year and goes up to 10 years for a minimum monthly income of RM 1500. The requirements also include an age limit of 20-58 years and Malaysian citizenship. This loan can be conveniently applied online on the direct lending website.

Before you apply for any loan, make sure you conduct thorough market research with loan installments, interest rates, and payback period. Choose a loan method that suits your income and paying back capabilities.