There is a wide range of loans and credit facilities available in the market. Before you apply for a loan or credit facility, be clear about the purpose of the application and whether you can afford the repayments.
Student loan
Student loans are offered by private organisations, government agencies as well as the Government to college or university students to help them pay for their higher education. The loans are provided at a very low interest rate and become payable when the students gain employment.
Most of the loans offered by the Government and its agencies, such as under the PTPTN fund, work on a revolving basis.
This means that there is a fixed amount of money in their fund and payments made by previous beneficiaries are used to help new applicants. Graduates who do not pay back their student loans are, in fact, denying others from the same benefit.
Personal loan
This is a loan offered for your personal use, not for a large purchase such as a house or car, but more for the purchase of a personal computer or money to use towards your marriage. It is tempting to apply for this type of loan because the application process is usually fast and easy. Moreover, most banks do not require a guarantor or collateral but the interest rates can be high.
Car loan
Most people want to have their own car as soon as they start working. They usually buy a car using a hire purchase (HP) loan. If you do so, you become the hirer of the car while the lender is the owner.
As the hirer, you pay instalments to the lender based on their terms and conditions. You become the owner after completing all your payments.
As with any other loan you take, ask yourself the important questions before deciding to borrow. Also work out your cash flow to see how much you can afford to pay in.
Housing loan
The market for housing loans today is very competitive and lenders now offer all kinds of loans to attract customers. Some loans are even packaged with free gifts.
Do shop around, get as much information as you can and compare items such as interest rates before deciding on the loan suitable for you. As with other loan products, you can choose between a conventional or Islamic housing loan.
A housing loan is a large financial commitment, one that will stretch over many years. Think very carefully about the various aspects of such a loan before making your decision.
Credit cards, charge cards and other cards
Credit cards allow you to buy items and pay for services electronically without using cash.When you use a credit card, the credit card acquirer will pay the merchant on your behalf and bill you later through your issuing bank. This makes purchasing things a lot easier.
A credit card can be a useful payment instrument if you know how to use it properly and wisely.
Credit card issuers have introduced attractive schemes, such as zero-interest instalment scheme, flexi-pay scheme and 0% balance transfer, to enable you to maximise on your purchases.
You can also earn loyalty points for usage of credit cards, a reward that is unavailable when cash payments are made.
You can opt to take advantage of reduced interest rates under the tiered pricing system with prompt monthly repayment.
A charge card is similar to a credit card. While a credit card allows you to make a minimum payment when you receive your monthly statement, a charge card does not.
With a charge card, you must pay the total amount due in full each month, failing which, late payment charges will be imposed.
A debit card is similar to an ATM card, except that you do not have to withdraw cash from an ATM. You can use the debit card to pay for products or services. The amount spent will be immediately deducted from your bank account. Like a credit card, it is convenient to use a debit card because you do not have to carry cash with you.
A prepaid card can be used to make purchases but there is a spending limit equivalent to the amount of money you.
place on the card. It is like a prepaid phone card or a Touch & Go card where you have a fixed amount of money you can spend.
When the amount placed on the card gets low, you can reload up to the maximum amount as determined by the card issuer. Debit and prepaid cards are better options for people who are not financially disciplined.
Normally, the credit card limit given is two or three times your monthly salary. If you use your card up to this limit, you are effectively spending at least two or three months of your salary in advance.
The Credit Counselling and Debt Management Agency (AKPK) is an agency under Bank Negara Malaysia tasked to help individuals take control of their financial situation. For assistance, please contact AKPK’s Power Infoline at 03-26167766 or visit www.akpk.org.my.