Table of Contents

What is Debt Settlement in Malaysia and How Does It Work?

Key Takeaways

  • Debt settlement is a strategy for individuals struggling with overwhelming credit card debt in Malaysia.
  • Bluebricks’ primary task is to assist clients in applying for bank loans so they can consolidate all their credit card debts and personal loans into a new personal loan.
  • Our clients can benefit from:
    • Receiving a discount for full settlement.
    • Having a lump sum of money in hand.
    • Improving their CTOS record, making it easier to buy a house or car and borrow from the bank in the future.
    • Lower monthly payments than before.
  • Debt settlement can simplify debt management and help achieve financial stability.
  • But, clients should remain informed, sceptical of false promises, and aware of all potential risks before committing to a debt settlement plan.

If you want to reduce your financial burden and regain control of your finances, consider debt settlement!

Resolving debt can be challenging and stressful, especially when it seems like there’s no end in sight. But what exactly is debt settlement, and how does it work?

In this article, we’ll break down the basics of debt settlement in Malaysia, explaining the process, and how it can be a viable solution for managing and reducing your debt.

Whether you’re struggling with credit card bills, personal loans, or other forms of debt, understanding debt settlement can help you find a path towards financial stability.

What is Debt Settlement?

Debt settlement in Malaysia is a strategy designed for individuals struggling with their credit card debt.

It includes negotiating with creditors to lower the total amount owed, thereby making it easier for debtors to manage and eventually pay off their debts.

However, navigating this process alone can be challenging, which is why loan agencies like Bluebricks offer their assistance.

At Bluebricks, we begin by assessing each case to ensure it is viable for debt settlement.

Once we confirm that a case is suitable, we assure the client that we will make a payment to the bank on the 20th of the month.

With this assurance, the client can then negotiate with the bank, agreeing to settle the debts by the end of the month.

This approach not only helps manage the debt but also provides an opportunity to request further discounts from the bank.

What is the Debt Settlement Process in Malaysia?

Bluebricks offers a streamlined debt settlement process designed to help borrowers in Malaysia manage and reduce their debt effectively. Here’s how it works:

1. Document Collection

    The process begins with collecting the client’s necessary CTOS and income documents, which provide a clear picture of the client’s financial situation.

    2. Feasibility Evaluation

    Our officers then evaluate the feasibility of a settlement based on the provided documents. This assessment helps determine if debt settlement is viable for the client.

    3. Agreement on Fee Structure

    Once the feasibility is confirmed, the client agrees to the fee structure for Bluebricks’ services. 

    4. Negotiation with Banks

    The client directly negotiates their debts with the banks, while Bluebricks handles the actual settlement process on their behalf. 

    5. Securing a New Personal Loan

    As part of the settlement strategy, the client may secure a new personal loan to consolidate their debts. This step helps them manage their repayments more efficiently.

    6. Repayment to Bluebricks

    After the settlement is completed, the client repays Bluebricks the principal amount plus the agreed-upon fee.

    Importantly, throughout the process, the client does not need to make any upfront payments nor pay interest to Bluebricks.

    7. Direct Payments to Banks

    Ultimately, the client makes direct instalment payments to the bank, not to Bluebricks.

    This ensures that the debt is repaid in a straightforward manner, with the client maintaining control over their financial obligations.

    By following this structured process, Bluebricks helps clients navigate the complexities of debt settlement, providing support and expertise every step of the way.

    This approach not only simplifies debt management but also helps clients achieve financial stability more effectively.

    Read More: How Does Credit Card Debt Relief in Malaysia Work?

    Is Debt Settlement in Malaysia Risky?

    Debt settlement can effectively manage and reduce debt, but knowing the potential risks is essential. Here are some key points to consider:

    1. Beware of False Promises

      Be cautious if a company claims it can eliminate your debt and halt lawsuits or collections.

      While debt settlement can work, creditors are not required to agree to a settlement, and there are no guarantees that your debt issues will be fully resolved.

      Always approach such promises with scepticism and do thorough research before committing to any debt settlement service.

      2. No Payment Before Settlement

      It’s a warning sign if a debt settlement company demands payment before performing any services. Legitimate companies should not require upfront fees.

      Always read the terms carefully and understand what you’re paying for. Ensure that any fees are clearly outlined and only due after the debt settlement process has been initiated.

      3. Stay Informed

      Make sure your debt settlement company fully discloses the risks and consequences associated with debt settlement.

      This includes the impacts of stopping payments to your financial institution, which can negatively affect your credit score and lead to additional penalties or legal action.

      You should be aware of all potential risks before committing financially. A reputable company will provide this information transparently and help you make an informed decision.

      Read More: What is Considered High Credit Card Debt in Malaysia?

      Why Was Your Bank Loan Application Rejected in Malaysia?

      Applying for a bank loan in Malaysia can be challenging, and several factors might lead to rejection:

      1. Credit Issues

      • CTOS score below 550: Banks consider this a high-risk indicator.
      • Late payments: More than two months overdue within the last six months.
      • Special Attention Account (SAA): Flagged accounts.
      • Trade references: Exceeding RM1,000.
      • Legal issues: Including bankruptcy.

      2. Income Factors

      • Recent employment: Less than six months at your current job.
      • Income in cash: Unverifiable income.
      • No EPF contributions: Employment without EPF contributions.
      • Contract or freelance work: Considered unstable income.

      3. High Debt-to-Service Ratio (DSR)

      • DSR over 70%: Monthly instalments exceeding 70% of net income make approval unlikely.

      In situations like these, bankers cannot assist clients in securing a loan. Applying to these circumstances would not only waste time but could also worsen your financial record.

      If rejected, you must wait six months before reapplying to the same bank, and each application can lower your CTOS score by 30 to 50 points.

      Moreover, a CTOS score below 550 leads to immediate rejection by some banks.

      How Bluebricks Can Help with Debt Settlement in Malaysia

      At Bluebricks, a bank loan and debt consolidation agency in Malaysia, we provide a variety of loan options to assist with debt consolidation and financial management:

      Trusted Loan Consultancy Services

      Our loan consultancy service is designed to match clients with the most suitable loan products based on their individual circumstances. Our expertise covers:

      • The specific loan amount you require.
      • The urgency with which the loan amount is needed.
      • Whether you or your parents own a property that has been held for over ten years.
      • Your income level.
      • Your CTOS score (such as your credit score and credit history).

      Why Bluebricks

      1. One of the Top 10 Leading Loan Agencies in Malaysia

      Our loan agents represent both individuals and businesses, offering technical financial advice to help secure loan approvals. Even if banks have previously rejected you, we provide access to a broad spectrum of loan options. Our aim is to enhance the success rate of your loan applications and minimise rejections.

      2. Over 10 Years of Experience

      With over a decade of experience and current banking knowledge, we excel in securing personal, business, mortgage, and collateral loans, navigating challenges like CTOS/CCRIS, and guiding clients confidently towards successful loan approvals.

      3. One-Stop Solution

      We provide a one-stop loan service, compiling various options from banks and credit institutions for you. Simply submit your income statement, assets, liabilities, employment record, and credit history, and we’ll handle the collateral and documentation to streamline your loan approval process.

      4. Full Financing with 100% Bank Loans

      We ensure 100% bank loan availability to provide full financial support, making it easier to achieve your goals and build a positive credit history.

      5. No Upfront Payment Required

      Our no upfront payment policy is designed to ease your financial journey, allowing you to start your investment without initial costs, reducing immediate burden and demonstrating our commitment to your satisfaction and trust.

      Debt Settlement – FAQs

      In this section, we’ll address the most common questions about debt settlement in Malaysia.

      What happens to credit card debt in Malaysia if it remains unpaid for seven years?

      In Malaysia, after six years, creditors lose the legal right to recover unpaid credit card debt. Once this period has passed, unsecured debts are considered ‘expired,’ and creditors cannot take legal action against the debtor.

      Can I use my credit card after debt settlement?

      Yes, you can typically continue using your credit card after settling debt, as debt settlement does not usually require closing your credit card accounts.

      Is it better to settle a debt or pay it off in full in Malaysia?

      Paying off debt in full is generally the best option if you can manage it. Explore different debt repayment strategies, such as debt consolidation, and consider seeking financial counselling to find the most suitable solution for your financial situation. 

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      Picture of Wilson Wai Kit

      Wilson Wai Kit

      Senior Consultant

      With extensive banking experience, notably as a mortgage sales officer at UOB Bank, Wilson leverages his understanding of loan applications and approvals to offer financial insights and support to empower individuals to make informed decisions regarding their financial futures.

      Feel free to contact him for assistance with your financial needs!

      I want to know about bank loans
      Picture of Wilson Wai Kit

      Wilson Wai Kit

      Senior Consultant

      With extensive banking experience, notably as a mortgage sales officer at UOB Bank, Wilson leverages his understanding of loan applications and approvals to offer financial insights and support to empower individuals to make informed decisions regarding their financial futures.

      Feel free to contact him for assistance with your financial needs!

      I want to know about bank loans

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      About Bluebricks

      BlueBricks Holding is one of the top ten leading loan agency companies in Malaysia in terms of loan approval rates. As a leading loan agency company, we have extensive knowledge and experience in mortgage, personal loans, and business loans, and this enables us to help our customers to get the deal that is best suitable to them.

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