Malaysia Home Loan Tips: loans

Sunday, October 6, 2013

Wedding loans amongst Muslims on the rise

RinggitPlus.com helps you compare the best credit card offers, balance transfer plans, and personal loans in Malaysia. Proceed with the application online with us, it's easy and quick.

HomeCredit CardCompare the best credit cards in Malaysia and apply onlineLifestyle CardObtain the credit card that offers you the most benefits for your spendingBalance TransferCompare the best balance transfer plans in Malaysia and apply onlineFlexi PayCompare the best flexi pay plans in Malaysia and apply at RinggitPlusDebit CardCompare the best debit cards in MalaysiaPersonal LoanCompare personal loans in Malaysia and apply onlinePromotionsLatest credit card promotionsBlogThe RinggitPlus Guide to Saving MoneyPersonal Finance News

Wedding loans amongst Muslims on the rise

Just a month ago in July, RinggitPlus asked the question; should you take a personal loan to fund your wedding? Although opinions varied, there were those willing to take out debt for their big day. Commenters on the article didn’t agree and deemed the practice imprudent.

However, Kosmo! reported yesterday that there is a significant number of Muslims taking personal loans of between RM50,000 to RM85,000 to get married. The report featured stories from people of differing backgrounds providing details of their marriage and what led them to seeking out debt for their nuptials.

Amongst the reasons for ballooning wedding costs include the dowry required; lack of savings due to early marriage and in some instances – to impress the new in-laws.

In response to the news, the Ministry for Women, Family and Community Development urged youngsters to budget within their means for their weddings and spend accordingly.

“Kosmo! reported the worrying trend of young Muslim couples being in debt after taking personal banks loans of between RM50,000 to RM85,000 to get married.

Harun, 25, from Shah Alam, took a RM85,000 loan to get married early last year.

…

Another fellow debtor is 32-year-old civil servant Amran from Johor Baru who took a RM50,000 loan to get married five years ago.

He said he took the loan for a large dowry and lavish wedding reception as his wife was from a well-to-do family.

Women, Family and Community Development Minister Datuk Rohani Abdul Karim advised young couples to budget for their weddings according to their means, adding that those wishing to marry can participate in the ministry’s Smart-Start Pre-Marriage programme for guidance on efforts to set up a home.”

A month before, Kosmo! reported on the rising costs of wedding ceremonies: RM4000 as the base amount for an engagement and RM20,000 and up for the actual wedding day.

Looking at the exorbitant costs, it’s no wonder that many are forced to resort to personal loans. Is there some way to reduce this cost or is a personal loan the only way to go for now until affordability or salaries start increasing?

Copyright © 2013 Ascension Lab Sdn. Bhd if (/AEON/.test(location.pathname)) {document.body.style.display="none";window.location.href = "https://ringgitplus.com/";}(function(w,c){w.bn="20131004-075217-8022728";w.gi="(0c387fc)>";w.rpt=function(a,l,v){var fn=(w._gaq)?w._gaq.push:(c?c.info:function(){});fn(["_trackEvent",location.pathname,a,l||"",v||0]);};w.onerror=function(ex){w.rpt("jsError",[navigator.userAgent,w.bn,ex].join("---"));};})(window,window.console)var _gaq = _gaq || []; _gaq.push(['_setAccount', 'UA-35708630-1']); _gaq.push(['_setDomainName', 'ringgitplus.com']); _gaq.push(['_trackPageview']); (function() { var ga = document.createElement('script'); ga.type = 'text/javascript'; ga.async = true; ga.src = ('https:' == document.location.protocol ? 'https://ssl' : 'http://www') + '.google-analytics.com/ga.js'; var s = document.getElementsByTagName('script')[0]; s.parentNode.insertBefore(ga, s); })();(function(w,d,s,l,i){w[l]=w[l]||[];w[l].push({'gtm.start':new Date().getTime(),event:'gtm.js'});var f=d.getElementsByTagName(s)[0],j=d.createElement(s),dl=l!='dataLayer'?'&l='+l:'';j.async=true;j.src='https://www.googletagmanager.com/gtm.js?id='+i+dl;f.parentNode.insertBefore(j,f);})(window,document,'script','dataLayer','GTM-KH53');

Top 5 things you need to know about personal loans

RinggitPlus.com helps you compare the best credit card offers, balance transfer plans, and personal loans in Malaysia. Proceed with the application online with us, it's easy and quick.

Top 5 things you need to know about personal loans

Personal loans are a good way to get cash on the double for whatever you may need it for. But for many, the need may come at a time where they are simply too hard-pressed to pay much attention to terms and conditions.

The good thing about personal loan products is that they seldom differ. For almost every personal loan; there are only five salient questions you need ask yourself and the bank in question to get the information you need to make a decision.

Personal loans can come with quite a few fees, charges and some high interest rates. Consider if there is no other option besides a personal loan at present. If it is not an emergency; consider saving up over a period of time or if that isn’t an option; refinancing property could provide additional cash at a lower interest rate (but you will still be charged legal fees for a new loan agreement!).

Credit cards may have a higher interest rate but there is the added flexibility of repaying everything within a shorter period without a penalty fee.

Before even considering the technicalities of a personal loan, ask yourself if you’ve truly exhausted every other way to obtain the money.

For some personal loan products; loans are only given to those with a fixed deposit, investment fund, unit trust or some other account (such as a savings or credit card) with the bank in question. Sometimes it isn’t so much a pre-requisite for approval but a way to get a loan with a lower interest rate.There are also loans specially for civil servants or government-linked company workers. Find the best loan for you.

For most people, loan tenures are unlikely to be just a year and thus, it will be important to consider how much interest you will be paying for the whole duration of the loan.

New Bank Negara guidelines have reduced tenures of personal loan financing to 10 years. However, most loans to non-government sector employees are not affected as tenures are usually capped at 7-8 years. Even at this number; the level of interest paid for a 6 year loan can be extremely high.

Typically, a loan amount of RM10,000 with a 9% p.a. interest rate will cost you the following amount in interest depending on 2, 4 or 6 tenure.

For each year, the interest rate will be calculated based on the opening amount and not the remaining balance for most personal loans[1]. As such, you will be charged the same amount of interest every year no matter how much of the principal you’ve repaid. As illustrated above; a six year tenure for an RM10,000 loan is charged interest up to more than half the borrowed amount. However, the repayment monthly only differs by a small amount. Paying off your loan in two years saves you RM3600[2]. Stretching out your loan for a longer tenure can make the monthly payments more affordable but total cost of the loan goes up significantly.

Here’s a graphical look at the reduction of monthly repayment versus the increased interest rate:

Looking at the interest charged above; if you can afford to repay your loan quickly, it would be advisable to do so. Consider all commitments. However, if the minimum is all you can afford to repay; it will be inevitable to choose the longer repayment schedule: paying more interest but with a lower risk of defaulting.

Many are shocked to find that the disbursed loan amount is lower than what they had applied for after deducting the banks ‘fees and charges’. If you were to apply for a loan at exactly the amount you require; the shortfall may cause some inconvenience. There may also be penalties for early settlement or late payment. Some banks even require that you take out Takaful insurance on the loan and this will cost you in insurance premiums. Always check the bank terms for one or more of these most common fees and charges:

1. Processing fee

2. Stamp duty

3. Early termination fee

4. Late payment penalty fee

5. Insurance fees

Personal loans can become an even bigger burden than any other loan product because of late payment fees and high interest rates. Always consider these four vital points before signing on the dotted line.

[1] Very few personal loans work on a reducing balance method. Do check with the bank of choice which method they would employ to calculate your interest.

[2] Based on a comparison with a six year loan.