Are you searching for how to calculate personal loan in Malaysia? Well, you’ve arrived at the right place!
When it comes to managing your finances in Malaysia, knowing how to calculate personal loans is a crucial skill.
Join us as we equip you with the skills and insights to calculate your personal loans efficiently.
What are the Key Components of Personal Loan Calculation in Malaysia?
Before diving into the calculation process, it’s essential to grasp the fundamental elements that influence your personal loan:
1. Principal Amount
This is the initial sum of money you borrow or the amount of loan granted by the bank or financial institution.
2. Loan Tenure
The duration or period over which the loan is to be repaid. Loan tenures in Malaysia can vary, usually ranging from one to ten years.
3. Interest Rate
The percentage of the principal that is charged is the cost of borrowing.
Interest rates can be fixed or variable and depend on several factors, including the loan provider and your creditworthiness.
4. Monthly Instalments
These are the regular fixed payments made by the borrower to the bank, covering both the principal amount and the interest.
5. Total Repayable Amount
This represents the sum total of the principal and all the interest payable over the entire loan tenure.
Read More: How to Get Personal Loan Without a Bank Statement in Malaysia
How to Calculate Personal Loan in Malaysia
You can calculate your monthly installment using either a formula or an online personal loan calculator.
To break it down further, you can calculate the total interest paid over the loan term by using this formula: Total Interest = Principal Loan Amount x Yearly Interest Rate x Loan Tenure.
Then, add the principal amount to this total interest. Next, divide the sum by the loan tenure and finally, divide it by 12 months to obtain the monthly instalment amount.
For example, if you are borrowing RM100,000 with a yearly interest rate of 10% for 5 years:
- Total Interest = RM100,000 x 10% x 5 years = RM50,000
- Total Loan Amount = RM100,000 + RM50,000 = RM150,000
- Yearly Installment = RM150,000 / 5 years = RM30,000 per year
- Monthly Installment = RM30,000 / 12 months = RM2,500 per month
Having said that, the most accessible method for calculating your personal loan is using a personal loan calculator. The tool is readily available on bank websites and financial comparison platforms.
A personal loan calculator offers a host of advantages, allowing you to make informed decisions and tailor your loan to your unique financial circumstances.
Here’s a closer look at the benefits of using this valuable tool:
1. Experiment with Different Scenarios
The tool provides a risk-free environment for exploring loan possibilities and optimising your financial planning.
You can input different values for the principal amount, loan tenure, and interest rate to determine the loan structure that best suits your financial needs before committing to a loan product.
Moreover, you can easily adjust loan-term lengths to see how they affect your monthly payments and total interest.
This flexibility allows you to strike a balance between comfortable monthly instalments and overall cost-effectiveness.
2. Budget Planning
Next, the calculator provides an estimate of your monthly loan repayment based on the inputted loan amount, tenure, and interest rate.
It serves as a crucial reference point in your budget planning process.
Armed with the estimated monthly payment, you can assess whether it comfortably fits within your existing monthly budget.
This step is vital in ensuring you don’t overextend your finances or compromise your daily living expenses.
If the calculated monthly payment appears too high for your budget to accommodate comfortably, you can consider adjusting the loan term.
It ensures that you commit to a loan that aligns with your financial capabilities and avoids excessive debt burdens.
3. Evaluate Total Interest Costs
Additionally, it offers a comprehensive view of the total interest you’ll pay over the entire loan term.
This figure helps you grasp the full cost of borrowing beyond the principal amount.
By evaluating the total interest charges, you can gauge whether the proposed interest rate aligns with your financial goals.
If the interest seems excessively high, it may prompt you to explore alternatives for securing a more favourable rate.
Overall, the calculator enables you to assess the affordability of the loan, explore cost-saving measures, and align your financial goals with your loan strategy effectively.
Read More: Personal Loan Malaysia: All You Need to Know
How to Minimise Personal Loan Costs in Malaysia
While calculating your personal loan is crucial, minimising costs is equally essential. Here are some strategies to help you save money on your personal loan:
1. Shop Around for Competitive Rates
First, don’t limit your search to just one or two banks. Malaysia boasts various banks and financial institutions, each offering different loan packages.
By casting a wider net and considering offers from multiple banks and lenders, you gain access to a broader range of loan options.
This allows you to conduct a comparative analysis, which is essential for identifying the most favourable terms.
While advertised interest rates are a good starting point, it’s imperative to dig deeper.
Some loans may come with additional fees, charges, or conditions that can significantly impact the cost of borrowing in the long run.
2. Refinance Your Loan
Refinancing your personal loan in Malaysia is a strategic move that can lead to significant cost savings and increased financial flexibility.
It involves replacing your existing personal loan with a new one, either from your current financial institution or a different one.
There are three common scenarios for refinancing in Malaysia:
- Property as Collateral
If clients or their parents have property that they’ve owned for more than 10 years, there might be a chance to refinance the loan using this property as collateral.
- Longer Loan Tenure
Some individuals opt to refinance their personal loans with banks offering a longer loan tenure.
This might reduce monthly payments, but it’s essential to remember that extending the loan’s duration could result in paying more in total interest over the life of the loan.
- Settle Credit Card Debts
Another reason for refinancing is to apply for a personal loan to settle all credit card debts, as personal loans often have lower interest rates compared to credit cards.
However, refinancing may come with additional fees and charges, such as processing fees, stamp duty, early settlement fees, or penalty fees.
Thus, it’s essential to carefully assess the potential benefits of refinancing against these associated costs.
3. Pay in Advance
Prepaying your loan means paying more than the regular Equated Monthly Instalment (EMI) or making a lump sum payment towards your loan.
This practice effectively reduces the outstanding principal amount and the overall interest rate, ultimately shortening your loan tenure.
The advantage of prepayment is twofold: you can save money on interest, and you’ll be able to pay off your loan more rapidly.
Nevertheless, it’s advisable to consult with your bank or financial institution to confirm whether any penalties apply to loan prepayment.
Read more: Backup Emergency Fund Malaysia: No More Savings but Need Urgent Cash? Do This
How to Calculate Personal Loan in Malaysia with Bluebricks
If you’re navigating the complexities of calculating a personal loan in Malaysia and require expert guidance, Bluebricks is your trusted partner!
Our consultants possess the expertise necessary to comprehend the intricacies of personal loan calculations in Malaysia. As a specialised bank loan and debt consolidation agency, we provide a suite of services tailored to your needs, including:
- Personal loan services
- SME loan rejected services
- Mortgage loan rejected services (for buying a new home, refinancing and cashback purposes)
- Collateral loan services
Loan Consultancy Services
With years of experience under its belt, Bluebricks is a prominent solutions provider of comprehensive loan consultancy services in Malaysia.
Our financial experts are here to suggest an appropriate loan product based on your unique circumstances with personalised services, which 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).
How to Calculate Personal Loan – FAQs
Here, we have compiled the most commonly asked questions and answers about how to calculate personal loans in Malaysia. Continue reading to empower yourself with the knowledge you need!
You can easily calculate your personal loan by using a personal loan calculator, a digital tool that helps you determine the monthly repayments and the total interest you’ll pay over the life of the loan.
To calculate a personal loan in Malaysia, you will need to know the:
- Principal amount (the initial sum borrowed)
- The loan tenure (the duration over which the loan is to be repaid)
- The interest rate (the cost of borrowing)
Once you have this information, you can determine the monthly instalment for the loan.
However, understanding the monthly instalment is just the beginning. Banks and financial institutions also examine an applicant’s Debt Service Ratio (DSR), often set around 60%, to decide on loan approval.
For example, if someone has an income of RM5,000, their DSR limit would be RM3,000. This is the total amount recommended for them to commit to debt repayments.
If their existing debts amount to RM1,000 and the new loan they’re considering has an instalment of RM2,500, their total new debt commitment would be RM3,500. As this RM3,500 exceeds the DSR limit, there’s a high chance that the loan application will be declined.
In such situations, it might be beneficial to approach loan agencies or reconsider the loan amount or tenure to fit within the acceptable DSR threshold.
If you have multiple loans, calculate the impact of each loan individually and then assess your overall financial situation. Consider consolidating or refinancing to simplify your repayments.
Yes, if your financial situation changes, you can recalculate your personal loan using updated information to see how it affects your payments and overall loan cost.
