Have you ever heard of a personal loan with collaterals in Malaysia?
Many use unsecured personal loans for unexpected expenses, home renovations, or debt consolidation, but few might be aware of this collateral-based option, which can offer better rates and terms.
But what exactly is a personal loan with collaterals, and how can one apply for it in Malaysia?
This article delves into the ins and outs of this financial instrument, guiding you through the process and ensuring you make informed decisions every step of the way.
What is a Personal Loan with Collaterals in Malaysia?
A personal loan with collaterals is often referred to as a secured personal loan, which requires an asset or property as security for loan approval.
The bank or lender will hold the asset as a guarantee should borrowers fail to make repayments. Common assets that can serve as collateral include:
- Homes
- Vehicles
- Fixed deposits
- Structured investments
- Unit trusts
- Other tangible assets
These loans are typically ideal for long-term borrowers who require a substantial amount and possess a valuable asset that can be pledged.
However, long-term repayments also mean accumulated interest, making it pivotal to assess the loan’s profit rate.
Read More: What are the Personal Loan Mistakes to Avoid in Malaysia
How to Apply for a Personal Loan with Collaterals in Malaysia?
Secured loans can be applied from banks, online lenders and credit unions. Here are the steps to apply for a personal loan with collaterals.
1. Research and Compare Lenders
To apply for a personal loan with collaterals in Malaysia, start by researching the different banks and financial institutions that offer these loans.
During your research, it’s vital to scrutinise their eligibility criteria, interest rates, loan tenures, monthly instalment amounts, and other associated fees.
One crucial factor to remember is that the value and condition of the collateral you intend to offer play a paramount role in the loan application process.
2. Prepare the Necessary Documents
Once you have done your research, it’s time to gather all the necessary documents.
Depending on the collateral type, you might need items such as:
- The original Land Grant.
- The original Certificate of Fixed Deposit or Structured Investment or Unit Trusts.
- A copy of the Passbook or Statement.
If you’re a salaried employee, the bank or lender will likely require:
- Copy of your NRIC.
- Latest 3 months’ validated payslips.
- Latest 3 months’ bank statements of the salary crediting account.
- Confirmation letter from employer.
On the other hand, self-employed individuals should prepare their:
- Copy of your NRIC.
- Business Registration Certificate or Operating License.
- Latest 6 months’ bank statements.
- Latest annual income statement (BE/B Form), with valid tax payment receipt.
- Last 2 years’ business financial statement.
3. Submit a Loan Application
After you have prepared all your documents, visit the bank or financial institution of your choice. Plus, some banks even offer an online loan application process.
Once you have submitted your application, the institution will review and assess your personal and financial documents as well as the value and relevance of the collateral you are offering.
4. Loan Approval and Disbursement
If your application is successful and you receive approval, the bank will provide you with a loan agreement.
It’s of utmost importance to meticulously read this agreement before signing it to understand the terms you’re agreeing to. Following this, the loan amount will be disbursed to you.
Depending on the collateral type, the bank or lender might physically hold onto certain assets, like Fixed Deposit Certificates, or register a legal claim over others, such as property.
5. Make Regular Repayments
Ensure you make regular and punctual repayments per the loan agreement’s agreed terms.
This is not only good to improve your credit score but also to avoid incurring penalties or risk losing your collateral.
6. End of Tenure
After you have successfully repaid the loan in full, the bank will return your collateral or release its claim over it as security, marking the end of the personal loan tenure.
How to Choose the Right Personal Loan with Collaterals
If you are not sure which personal loan with collaterals is right for you, here are some things to consider:
1. Check Collateral Requirements
Start by checking the collateral requirements of the loan. It’s essential to ascertain which assets the bank finds acceptable as collateral, such as real estate, vehicles and investments.
Besides, you should understand the loan-to-value ratio, which tells you how much you can borrow relative to the value of your collateral.
2. Get to Know Repayment Terms
More importantly, ensure that you fully comprehend the repayment terms. This includes understanding the pros and cons between a shorter and longer loan tenure.
While longer loan terms might seem appealing due to lower monthly payments, they could end up costing more in interest over time.
It is best to compare multiple repayment terms from various lenders and banks to find an offer that meets your borrowing needs and your monthly budget.
3. Consider Interest Rate Options
Remember that secured loans typically come with more attractive Annual Percentage Rates (APRs).
This favourable rate is because these loans present a reduced risk for lenders, given the collateral backing.
4. Take Note of Additional Fees
Keep in mind the additional fees associated with the loan. Look out for upfront fees like processing fees, origination costs, and closing costs.
After the loan fund has been disbursed, be vigilant about potential fees that can accrue, such as late payment or prepayment penalties.
Remember that reading all paperwork in detail is the best defence against unexpected costs and misunderstandings.
Read More: Why You Shouldn’t Opt for Loan Sharks in Malaysia
How Bluebricks Can Help You with Personal Loans with Collaterals
Based on your financial capability and requirements, we assist you in exploring secured personal loans to empower your financial choices.
By understanding loan eligibility and terms, we help individuals select the most suitable personal loan for their diverse requirements, ensuring no added financial stress.
As a reputable bank loan and debt consolidation agency in Malaysia, Bluebricks is dedicated to improving your financial well-being and building lasting relationships with our clients.
Our wide range of loan services include:
- Personal loan services
- SME loan rejected services
- Mortgage loan rejected services (for buying a new home, refinancing and cashback purposes)
- Collateral loan services
Professional Loan Consultancy Services
When you consult with us, we help you better understand your financial situation and recommend the ideal loan product for your circumstances.
Some of the vital factors that we look into include:
- 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).
Personal Loan with Collaterals – FAQs
Applying for a personal loan can be daunting, so we have curated a list of helpful FAQs you may encounter.
For further enquiries about particular secured personal loans, you can seek clarification from the respective banks or lenders.
An unsecured personal loan does not require collateral, meaning the lender cannot seize any of your assets if you default on the loan.
Due to the higher risk to lenders, unsecured loans often come with higher interest rates and stricter qualification criteria compared to personal loans with collateral (secured personal loans).
If you default on a secured personal loan, the bank or lender has the right to seize the collateral you provided.
This may also involve selling the asset to recover the outstanding loan amount.
In most cases, yes. For example, if you use your vehicle as collateral, you can still drive it.
Moreover, it’s worth noting that a borrower is permitted to sell the collateral, such as a car or house, even if the loan secured against it hasn’t been completely repaid.
This is because, should the selling price be lower than the amount still owed on the loan, then the borrower will need to top up the difference.
Conversely, if the selling price exceeds the remaining loan balance, the borrower will make a profit from the transaction.
