Are you having trouble managing your financial responsibilities? If so, a personal loan for high commitment situations can help you navigate these complex financial waters!
In this article, we’ll explore the ins and outs of personal loans for high commitment individuals, highlighting potential challenges and offering insights into effective loan management.
By the time you finish this piece, you’ll have the information you need to decide whether a personal loan is right for you – and how to get one responsibly.
What are Personal Loans for Individuals with High Commitments in Malaysia?
Personal loans are often the go-to solution for many individuals when faced with unexpected expenses or financial challenges.
However, for those juggling multiple debts in Malaysia, such as credit card balances, car loans, student loans, and mortgages, securing an additional personal loan can seem overwhelming.
This challenge stems from the fact that banks rely on a borrower’s CCRIS report to track their monthly financial obligations, including their payment records and outstanding debts.
Furthermore, one key metric lenders use to assess an applicant’s creditworthiness is the Debt Service Ratio (DSR).
It compares the borrower’s monthly debt payments to their net income, which banks use to determine if they can take on additional debt while maintaining financial stability.
Therefore, as a general rule of thumb, it is recommended to maintain a DSR of below 60% to increase your chances of loan approval.
For instance, if your net salary is RM5,000 per month, your monthly debt payments should not exceed RM3,000.
Read More: Backup Emergency Fund Malaysia: No More Savings But Need Urgent Cash? Do This
What are the Challenges of Managing Personal Loans for High Commitment Individuals in Malaysia?
Managing personal loans for high commitment individuals presents its own set of challenges, among which include:
1. Time Constraints
Keeping track of personal loans effectively demands considerable time and attention. This encompasses monitoring repayment schedules, liaising with lenders, and staying on top of financial paperwork.
However, high commitment individuals may find it difficult to allocate sufficient time for these tasks due to their heavy workload, family responsibilities, or other obligations.
As a result, they may struggle to keep up with loan payments, leading to missed payments and potential late fees.
2. High Financial Obligations
High commitment individuals often have multiple financial obligations, such as mortgage payments, car loans, and education expenses.
Adding personal loans to this mix can further strain their financial resources and budgeting capabilities. This might compel them to prioritise some expenses, potentially overlooking loan repayments or critical deadlines.
3. Emotional Stress & Financial Strain
Consistent anxiety over debt, looming repayment dates, and the broader financial picture can adversely impact one’s mental health.
Moreover, the fear of defaulting on loans and the potential consequences can worsen these feelings, making it even more challenging to manage personal loans effectively.
4. Risk of Default & Its Implications
Loan defaults can result in grave consequences, including damage to credit scores, legal actions, additional fees, and even bankruptcy.
Unfortunately, individuals with high commitments are particularly susceptible to loan default due to their pre-existing financial obligations and restricted financial flexibility.
Read More: Top-Up Loan Malaysia: 3 Important Things to Know Before You Apply
How to Manage Personal Loans for High Commitment Individuals
Fortunately, high commitment individuals can employ various strategies to manage their personal loans and attain long-term financial stability efficiently. Here are six measures to help you get started:
1. Look for Short-Term Side Jobs for Extra Cash
One effective strategy for dealing with high financial commitments is to look for short-term side jobs to supplement your regular income.
These could include part-time employment, freelance work, or even starting a small side business.
By diversifying your income streams, you increase your capacity to allocate more funds towards paying off your loans, thereby significantly reducing your debt burden.
2. Apply for a New Personal Loan with a Lower Interest Rate
For those grappling with high-interest credit card debt (e.g. 18%), consider applying for a personal loan that offers a much lower interest rate (e.g. 3% to 15%).
On the other hand, if you have multiple personal loans, seeking out a bank offering a more competitive interest rate, such as going from 10% to 7%, may be advantageous.
Alternatively, you could also apply for a longer repayment term, extending a 5-year loan to a 10-year loan.
Doing so translates into manageable monthly payments and more extended periods for repayment.
3. Refinance Your Home
If you or your family own a house purchased over a decade ago, consider refinancing it. This approach involves utilising the equity in your home to either:
- Pay off existing debt, or
- Extend the repayment period by up to 35 years (until 70 years old or 35 years from the time of refinancing).
Such a tactic can offer relief and enhanced financial stability, enabling you to navigate your obligations more comfortably.
4. Create a Budget & Prioritise Expenses
Creating a well-structured budget serves as a foundational step towards effective loan management. By meticulously outlining your income and expenses, you can set aside a designated portion for loan repayments.
Moreover, it’s essential to adjust your spending habits. You can do so by prioritising necessary expenses and eliminating non-essential ones to free up funds for loan payments.
5. Seek Professional Advice
At times, managing personal loans and other financial obligations may require external expertise, and financial advisors or credit counsellors can offer invaluable assistance in such situations.
These professionals can assess your financial health, create a personalised repayment plan, and advise on various debt management strategies, helping you navigate your financial commitments with less stress.
6. Review Loan Terms & Benefits
Lastly, it’s crucial to remain proactive about your loan terms. Regularly review your terms and conditions to remain updated about any changes in interest rates, fees, or repayment options.
Additionally, explore any perks or incentives offered by your lender.
Some banks might offer interest rate reductions for enrolling in automatic payments or have loyalty programmes that can translate into savings or benefits for the borrower.
Read More: A Look Into Personal Loans for Blacklisted Individuals
How Bluebricks Can Help with Personal Loans for High Commitment Individuals
In conclusion, managing personal loans for high commitment individuals in Malaysia involves a combination of proactive measures, financial expertise, and careful decision-making.
By adopting the abovementioned strategies, individuals can enhance their financial resilience, reduce debt-related stress, and achieve greater financial freedom.
Or, should you need help managing your debts, Bluebricks is a bank loan and debt consolidation agency in Malaysia that you can trust.
We are committed to empowering individuals and businesses alike through a range of financial solutions tailored to their unique circumstances, including:
- Personal loan rejected services
- SME loan rejected services
- Mortgage loan rejected services (for buying a new home, refinancing and cashback purposes)
- Collateral loan services
Tailored Loan Consultancy Services
At Bluebricks, we are all about making loan decisions simple. Our experts have the knowledge to recommend a suitable loan product based on your unique circumstances, 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).
Personal Loan for High Commitment – FAQs
To provide further clarity on personal loans for high commitment individuals in Malaysia, we have gathered a collection of commonly asked questions and provided thorough explanations below.
To secure a larger personal loan, especially if you have many financial commitments, you must prove that you can manage additional debt responsibly.
Here are three ways to enhance your eligibility:
Improve Your Credit Score
Exhibit responsible financial management by paying bills on time and reducing existing debts to maintain a favourable credit score.
Reduce Your Debt-to-Income Ratio
Minimising your existing debts lowers your debt-to-income ratio, thus showcasing your ability to handle more debt.
Have a Loan Repayment Plan
Outline a detailed repayment strategy to illustrate how you plan to manage the larger loan alongside your existing commitments.
When considering a personal loan for high commitment situations, there are several factors you should take into account before applying, such as:
Your Debt Load
Evaluate your current financial obligations, including existing loans, to gauge your overall debt load.
Your Repayment Capacity
Analyse your income stability and monthly cash flow to determine your ability to make loan repayments comfortably.
Your Future Financial Goals
Consider how the loan fits into your long-term financial plans and whether it supports or hinders your goals.
When it comes to personal loans for high commitment individuals, there are several factors that banks consider when evaluating your eligibility, including:
Your Income
Financial institutions typically require proof of employment or other sources of income to assess your ability to afford the loan.
Additionally, banks categorise incomes based on their nature, such as fixed basic pay or commission-based earnings, when assessing an individual’s creditworthiness.
They tend to prefer individuals with a fixed basic pay as it’s perceived as a more stable source of income compared to commission-based earnings.
Your CTOS Report
Your CTOS score is crucial in the loan approval process. Generally, a score below 640 is viewed negatively, potentially leading to application rejections.
Furthermore, your CCRIS repayment history will be thoroughly examined by the bank. Timely repayments boost your eligibility, while late payments or defaults can raise red flags for potential lenders.
It’s also worth noting that banks will check for any outstanding amounts you have with trade references.
For example, having an outstanding balance exceeding RM1,500 with a trade reference (like Maxis) could label you as high-risk.
Your Employer’s Background
Your employer’s reputation and financial stability can also influence the bank’s decision when approving personal loan amounts.
Take, for instance, two individuals both earning RM5,000 monthly. If one works for a reputed, established company and the other for a lesser-known firm, the former will be deemed more favourable than banks.
This is because, even with the same salaries, the one associated with a prominent company is likely considered a safer choice due to the employer’s stability and good standing.
