Dealing with Credit Card Promoters

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Dealing with Credit Card Promoters

Have you ever been hounded by pushy credit card promoters? You know, the kind who offers you 'instant free gifts' and other things you may never use so you will sign up with them?

If you have, YouTuber Jennchiayy has got some solutions for you.

Check out her hilarious video on how she deals with this everyday shopping peeve.

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Use your EPF to pay for your Home Loan or Tuition

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Use your EPF to pay for your Home Loan or Tuition

We all know the importance of having an Employees Dividend Fund (EPF) account: That special fund that can only be accessed after retirement. But besides acting as a retirement nest egg did you know that your EPF savings can be used to help you with some of your debt?

Every EPF account is broken down to Account 1 and Account 2. Every month 70% of your EPF contribution is allocated to Account 1 while the remaining 30% goes to Account 2. Account 1 is off limits until you reach the age of retirement but you can tap into your funds in Account 2 for various investments such as buying a house or paying for a higher education course.

You can withdraw from your EPF to service a home loan if you’re purchasing residential property. There are many circumstances and conditions for the maximum amount allowed but the withdrawal guideline is either 10% of the house price or all of Account 2. To qualify, you would need to provide the Sale and Purchase Agreement which is not more than 3 years from the date of application among other related documents as listed in EPF’s website.

If you have an existing house loan, you can lighten the load with your EPF savings. You could either choose to settle a lump sum payment (capital repayment) or opt to have EPF service the monthly repayment. For a lump sum payment, the amount depends on how much you have available in account 2 or the total balance of your loan whichever is lower.

For monthly repayments; you will also only be allowed to take out the available balance from account 2. Calculating how many payments you can make with the available balance and fill in the form accordingly. EPF will block the entire amount and make the payments every month automatically. However, this means that the full amount is removed from your EPF account and you will not be receiving any interest from EPF on it. As such; many customers prefer to take out lump sum amounts and have their banks convert it into advance payments.

To perform either withdrawal method, you will need to request for a balance statement from your bank. The statement is specifically for EPF purposes and will contain details of the property as per your Sale and Purchase Agreement as well as your loan details. The amount withdrawn from EPF will then be credited directly to your home loan account. Your Account 2 funds can also be used to reduce/redeem a housing loan on behalf of a spouse or immediate family member. All withdrawals are subject to a minimum withdrawal of RM500 or all of Account 2 savings.

If you have an education loan with PTPTN or MARA, you can choose to repay in full or in part using your available balance in Account 2. Similar to housing loan repayments; you will need to apply for a balance report from PTPTN or MARA and submit this along with the relevant documentation as required by EPF. This can be done by both the former student or his/her parents.

Current and future students who did not qualify for PTPTN or other loans can also fall back on the EPF of their parents to finance tuition fees. You can opt to withdraw once per academic year or each semester. Be aware though that an interview is required every time you submit an application for withdrawal. Make sure you do your homework before you apply. Swing by the KWSP website to confirm if the education institution and course you are enrolling your child with is recognised for EPF withdrawals. The amount you are able to withdraw will be limited to either the amount of fees or the amount you have available in Account 2, whichever is lower.

These are just a few options that are available to as an EPF member. You can visit the KWSP website for a full list of withdrawal purposes.

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Catch the Cashback Fever – Apply for a Citibank credit card

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Catch the Cashback Fever – Apply for a Citibank credit card

Citibank is offering you an almost free shopping spree (up til RM550 of course) when you sign up for a new Citibank credit card. If you fulfil the set criteria, you stand to earn up to RM550 in cash back.

It is a simple four step programme:

Just apply for a credit card, submit your completed form within 7 business days and upon approval start spending. If your spending reaches the required threshold within 60 days, you’ll receive the designated amount of cashback. For submitting your completed form within the designated time; you’ll receive an additional RM50.

The tier for spending and cashback is RM200 for spending between RM800-RM3499 and RM500 for spending totalling RM3500 and above.

However, do note that the promotion is available only to the first 400 eligible customers who must be new applicants. So even though the offer expires on the 13th of August; you’d best apply sooner to fit into the first 400 approved.

For more information, do read the terms and conditions.

Not sure which Citibank credit card is right for you? Check our comparison tool first.

*Image courtesy of Citibank promotion page.
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A new perspective on types of insurance

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A new perspective on types of insurance

Are you confused about the types of insurance policies in the market? With so many plans to choose from, it is very likely that you feel helpless when it comes to answering this question - “What do I need and how much is enough?” More often than not, you don’t know what you don’t know. Hence, I would say, most people are at the mercy of insurance agents, who are probably more interested in how much they can earn from a product rather than putting your interests first. Not to generalise, but it happens more often than we think.

I want to make it real simple by using a laddering process. From the very top level, there are 2 types of insurance. One is participating and the other is non-participating. A participating policy, as the term suggests, participates in the insurance company’s profit. A non-participating policy does not. Therefore, the premiums for a participating policy are always more expensive, ceteris paribus.

Participating policies

Participating policies can be either a whole life plan or an endowment plan. A whole life plan is a plan which offers you protection until age 100. Normally there would be bonus or dividend declared every year by the insurance company and this would add into a policy basic sum assured payout. To a certain point, say after 15 or 20 years (not a rule, but a norm), the compounding effect of this accumulated bonus and dividend would be sufficient to cover for the policy annual premium. When this happens, the policy can be self-sustaining, in which a policy owner can request for APL or Automatic Premium Loan. Endowment policies aka savings plan, meanwhile, works similarly but the duration of coverage is normally fixed at 20 or 30 years. On top of that, there is a guaranteed schedule which pays the policy owner a regular cash value. Due to this feature, the sum assured for endowment is normally lower than a whole life plan, ceteris paribus. It is marketed as having the best of both worlds.

Non-participating policies

Non-participating policy can be either a whole life plan, investment-linked plan, hospitalisation and surgical plan or a personal accident policy. Whole life non-participating plans have a schedule of guaranteed surrender values, so you know exactly what you are paying for and how much you are getting back at the end of the day. Compared to traditional whole life non-participating plans, an investment-linked policy is even more cost effective. The cons of it is that the policy sustainability very much depends on the non-guaranteed performance of the unit trust funds managed by insurance companies. However, there are ways to mitigate this risk. Hospitalisation and surgical policy aka medical card is very much like your debit card with a predetermined limit on the annual and lifetime inpatient medical expenses. Finally, there is nothing fancy about a P.A. policy as it is just a subset of a life policy where it only pays if the covered event is due to accident.

Lieu Ching Foo is the founder of Malaysian personal finance blog HowToFinanceMoney.com, and an advisor with independent financial advisory firm Fin Freedom.

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PTPTN loan defaulters not going into CCRIS

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PTPTN loan defaulters not going into CCRIS

How do we solve a problem like Maria? Especially if Maria took out a RM55,000 loan to study and never repaid a sen.

Sound of Music analogies aside, the National Higher Education Fund Corporation (PTPTN) thought a team up with Bank Negara and the usage of the Central Credit Reference Information System (CCRIS) would help the problem loan defaulters.

Previously, the government backed education loan body resorted to blacklisting defaulting borrowers on Immigration records to prevent them from going overseas (ironically, one of the same prohibitions imposed on bankrupts in the country). But that didn't seem to work as PTPTN still finds themselves with RM2.8 billion worth of unpaid loans.

However, the announcement made on Tuesday through various news channels were met with unanimous dissent from all sides of the political arena. Malay rights group Perkasa was one of the first to come forward with their objections, followed closely by opposition party PKR. But the fate of the unpopular decision was sealed yesterday when cabinet ministers including the ruling UMNO threw out the suggestion. 

UMNO Youth Chief, Khairy Jamaluddin didn't think the move was a good idea. He felt PTPTN should come up with other ways to retrieve the unpaid sums. His rationale:

"This is because PTPTN loan is different from other credit facilities such as credit card or hire purchase which are loans taken out of personal choice while PTPTN is a necessity for students,” he said.

The opposition also had their two-cents worth in a rare show of solidarity with UMNO leaders on the issue. PKR de-facto leader Datuk Seri Anwar Ibrahim termed it "further victimisation" of borrowers after the immigration blacklist.

“It must be remembered that the central issue here is not merely how the government could facilitate the loan recovery.

“The issue is the failure of the UMNO-BN government in discharging their social justice responsibilities of providing free tertiary education particularly to the underprivileged,” he said in a short statement posted on his blog.

So what is the loan body to do?

Tertiary education is not free for everyone even in the most developed economies. Student loans in the US have approached the trillion mark, half of which aren't being repaid. Yet, with gloomy economic conditions students everywhere are finding it harder and harder to pay off their student loans.

Factor in stagnating salaries, booming property prices and growing inflation rates and the financial noose on fresh graduates continue to tighten. But neither the economy nor our government has the means of supporting free tertiary education for the whole nation.

Is the education bubble going to burst faster than the property bubble?

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Wedding loans amongst Muslims on the rise

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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?

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Top 5 things you need to know about personal loans

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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.

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