- Personal loan rates in Malaysia have recently increased, influenced by a rise in the Overnight Policy Rate (OPR).
- This is due to a variety of factors, including low OPR during the COVID-19 pandemic, adjustments based on the country’s economic health and many more.
As you explore various personal loans in Malaysia to find the one that suits you best, you might wonder: Have personal loan rates increased over the years?
The short answer is yes. Continue reading to discover the factors that influence personal loan rates in Malaysia.
Our aim is to provide you with a clearer understanding to craft a more informed financial plan.
Have Personal Loan Rates Increased in Malaysia?
Yes, personal loan rates in Malaysia have recently increased. The OPR heavily influences loan rates, but how does it work? Here’s a simple explanation to help you understand:
1. Recent Increase in OPR
The OPR, serving as the benchmark interest rate in Malaysia, was increased by 25 basis points (bps), bringing it to 3.00%.
This adjustment in the OPR is significant because it usually leads to a domino effect on various lending rates, including the rates for personal loans.
2. Cascading Effect on Lending Rates
When the OPR is raised, it becomes more expensive for banks to borrow money.
Consequently, banks typically pass on this increased cost to consumers by raising interest rates on various types of loans, including personal loans.
Therefore, individuals seeking personal loans in Malaysia may now encounter higher interest rates than before the OPR hike.
Why Have Personal Loan Rates Increased in Malaysia?
It’s worth noting that the increase in OPR is also caused by several other factors. This includes:
1. Low OPR During COVID-19
In response to the economic inbalance caused by the COVID-19 pandemic, BNM reduced the interest rates to historically low levels, dropping from 3.00% to 1.75% in 2020.
This move aimed to stimulate economic activity by making borrowing cheaper and encouraging spending during a period marked by uncertainty and financial strain.
2. Timing and Economic Health
Interest rates also play a pivotal role in the overall health of an economy and must be adjusted in response to the current economic conditions.
When the economy begins to recover and shows signs of health, it becomes important to reassess the status of interest rates.
This is because keeping these rates excessively low for an extended period during a recovery phase can have unintended consequences, like an increase in spending and borrowing.
While this might seem beneficial in the short term, it can lead to an oversaturated market where the demand exceeds the supply, thereby fueling inflation.
3. Preventing High Inflation
To prevent high inflation, BNM often raises interest rates as the economy improves, preventing the economy from overheating and experiencing excessive inflation.
This is because high inflation can significantly erode purchasing power, leading to a cycle of rising prices and wages, which in turn can destabilise the economy.
4. Balancing Economic Growth
Lastly, BNM aims to balance economic growth with inflation control. To achieve this, adjusting interest rates is a key tool.
Lowering rates can stimulate growth in slow economic times, while raising them helps cool an overheating economy and prevent inflation. This approach ensures steady and sustainable economic growth.
Bluebricks’ Comprehensive Loan and Consultancy Services
For borrowers in Malaysia, this increase in personal loan rates means adapting to a new financial environment where loan costs may be higher, requiring careful consideration of their borrowing needs.
Bluebricks is a proficient bank loan and debt consolidation agency in Malaysia with the expertise to assist individuals in understanding and managing the financial aspects of securing a large loan.
We offer a range of services that cater to different needs, including:
- Personal loan services
- SME loan services
- Mortgage loan services (for buying a new home, refinancing and cashback purposes)
- Collateral loan services
Moreover, our consultancy services are tailored to your specific financial situation, considering factors like:
- 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).