Have you ever wondered how to navigate the waters of a personal loan repayment extension in Malaysia?
When financial challenges arise, knowing your options is key to maintaining stability and retaining your financial peace of mind.
In this article, we delve into the world of personal loan repayment extensions in Malaysia, shedding light on what they are, how they work, and why they matter for borrowers like you.
What is the Personal Loan Repayment Extension in Malaysia
In Malaysia, a personal loan repayment extension is also known as a loan deferment or loan moratorium.
This invaluable arrangement allows individuals to temporarily hit a pause on their loan repayments, providing a much-needed breather during unexpected financial difficulties or crises like the COVID-19 pandemic.
1. How a Personal Loan Repayment Extension in Malaysia Works
Essentially, loan deferments involve a straightforward concept: borrowers agree to temporarily postpone their loan payments for a specified duration. This flexibility can be a financial lifesaver during unforeseen challenges.
For instance, if you had originally planned to make your loan repayment in November 2023 and were granted a one-month deferment.
Your new repayment date would then shift to December 2023, assuming no further extensions are granted.
2. What is a Personal Loan Repayment Extension For
The primary objective of offering personal loan repayment extensions in Malaysia is to provide essential financial relief to borrowers navigating temporary financial hardships.
It serves as a lifeline during tough times, helping borrowers manage their cash flow effectively.
Whether it’s coping with job loss, unexpected medical expenses, or economic downturns, these extensions act as a crucial safety net to ensure borrowers don’t face undue financial strain.
3. Personal Loan Repayment Extension Eligibility & Application in Malaysia
To access a personal loan repayment extension, you must meet specific eligibility criteria determined by your respective financial institutions. These criteria often revolve around demonstrating genuine financial distress, such as:
- job loss
- medical emergencies,
- or other circumstances which necessitate the need for an extension.
Applying for an extension is typically done by reaching out to the financial institution directly.
Keep in mind that the application process can vary from one financial institution to another.
As such, it’s pertinent to understand your bank’s specific requirements and procedures for a successful extension request.
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What is the Impact of Personal Loan Repayment Extension in Malaysia
1. Temporary Relief
A personal loan repayment extension serves as a much-needed respite if you’re grappling with financial difficulties.
This temporary relief can be a lifeline during times of immediate financial strain and emergencies, offering a breather to reorganise finances and regain stability.
2. Preservation of Credit Score
When executed properly, an approved loan repayment extension should not adversely affect your credit score.
However, it’s crucial to ensure that your financial institution accurately reports the deferment to credit bureaus.
Additionally, it’s worth noting that any missed or late payments prior to the extension might have already impacted your credit score.
Furthermore, after the COVID-19 moratorium period, all loan extensions will result in the loan being restructured.
This will be reflected in your credit report as a “C” designation, indicating that you received the necessary financial assistance and had your loan restructured.
It’s essential to be aware that having a “C” in your credit report may affect your ability to secure new loans until the restructured loan is fully paid off.
Therefore, if you wish to apply for new loans, you must settle the existing loan first.
3. Additional Interest Costs
While a personal loan repayment extension provides short-term financial relief, it comes with a potential downside. The interest on your loan continues to accumulate during the deferment period.
As a result, you may need to pay higher overall interest costs over the life of the loan.
To make informed decisions, borrowers should carefully consider the total cost of borrowing, factoring in the extension.
4. Early Repayment Consideration
Next, to accommodate the deferred payments, the loan tenure may be extended. This means that you might have to make payments for a longer duration once the extension period concludes.
While this extension can provide immediate relief, it’s extremely important to weigh the impact on your long-term financial plans and commitments.
After all, you should always plan for your financial future!
5. Increased Monthly Payments After Extension
Depending on the terms of the extension, borrowers may encounter an adjustment in their monthly payments after the deferment period.
This adjustment is often made to compensate for the deferred amounts.
Remember to be thoroughly prepared for potentially higher monthly payments if your budget isn’t equipped to handle the increased financial responsibility.
Read More: Personal Loan Without CCRIS in Malaysia: How to Get One
Should You Apply for a Personal Loan Repayment Extension in Malaysia?
Whether or not you should apply for a personal loan repayment extension in Malaysia depends on your unique financial needs.
Thus, you must carefully assess your situation and the potential benefits of an extension in consultation with your financial institution.
1. Financial Hardship Due to Unexpected Events
You may consider applying for a personal loan repayment extension in Malaysia if you face unexpected financial difficulties.
It helps ease your burdens when you need it most, allowing you to regain your financial footing.
Whether it’s the loss of a job, unexpected medical bills, natural disasters, or economic crises like the COVID-19 pandemic, these extensions can offer you a quick and temporary respite.
2. Temporary Income Loss
Furthermore, you can opt for a loan moratorium in cases where you experience a temporary reduction in income or are unable to work due to illness or injury.
It bridges the gap between your current situation and when you can resume regular payments.
By providing this financial breathing space, it prevents you from falling into deeper financial distress.
3. Cash Flow Challenges
A loan repayment extension emerges as a priceless asset when you face cash flow challenges that make it challenging to meet your loan obligations without compromising essential expenses like:
- housing,
- food,
- or utilities.
It helps you prioritise your immediate and pressing needs, enabling you to cover your essential expenses without the added stress of loan repayments.
Effectively, it ensures your foundational well-being remains secure, even in the face of financial turbulence.
4. Preventing Loan Default
Lastly, if you find yourself at risk of defaulting on your loan due to missed payments, a personal loan repayment extension can be a crucial measure to consider.
- Defaulting on a loan can have serious repercussions, including:
- damage to your credit score
- and the potential for legal action by your financial institution.
By applying for an extension, you can steer clear of these negative consequences and work towards a more manageable financial solution.
Read More: Should You Use Your EPF Savings to Apply for a Personal Loan
What are Other Options for Personal Loan Repayment Extension in Malaysia
Each of these alternatives offers its own set of advantages and considerations, and the choice should align with your unique situation and long-term financial goals.
1. Loan Refinancing
Loan refinancing is a proactive approach that involves substituting your existing loan with a new one, often obtained from a different bank or financial institution.
The allure of loan refinancing lies in the potential for more favourable terms, which may include:
- a lower interest rate,
- or an extended repayment tenure.
Opting for loan refinancing can potentially reduce your monthly financial burden. Not only that, but it can also make your loan more manageable over the long term.
2. Modified Payment Plan
If you’re looking to adapt your current loan without seeking an extension, discussing a modified payment plan with your financial institution is an avenue worth exploring. This negotiation may involve:
- tweaking the repayment schedule,
- decreasing the monthly instalment amount,
- or temporarily suspending the accrual of interest.
This collaborative endeavour with your financial institution to craft a modified payment plan allows you to tailor your loan terms to better align with your current financial capabilities.
3. Seek Professional Assistance
When faced with a complex web of debts and loans, seeking professional financial advice or counselling can be a wise step. Financial counsellors possess the expertise to help you:
- create a comprehensive budget,
- prioritise your expenses,
- and craft effective debt management strategies.
Their guidance can illuminate the path towards regaining control of your finances and ensuring a more stable financial future.
4. Explore Government Relief Programs
During economic adversity, governments and regulatory bodies may introduce relief programs designed to assist borrowers in distress. These initiatives can encompass a range of measures, such as:
- loan moratoriums,
- interest rate subsidies,
- or debt restructuring programmes.
Exploring these government relief programs can provide you with additional avenues to secure financial respite and solidify your path toward renewed financial stability.
Read More: What are the Best Alternatives to Personal Loans in Malaysia
How Bluebricks Can Help You with a Personal Loan Repayment Extension in Malaysia
At Bluebricks, our commitment extends to helping you secure the financial relief you need.
We’re here to support you through the complexities of personal loan repayment extensions in Malaysia and guide you toward a more secure financial future.
Our specialised financial acumen enables us to design an array of comprehensive financial solutions to meet your distinct needs. These include:
- 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 Service
We are dedicated to empowering both individuals and businesses to make well-informed decisions.
Our aim is to optimise your borrowing experience, ensuring it’s not only efficient but also reduces potential risks. We achieve this by taking into account the following critical factors:
- 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 Repayment Extension – FAQs
To provide you with a clearer understanding, we have meticulously assembled a comprehensive list of frequently asked questions (FAQs) concerning personal loan repayment extensions in Malaysia:
You can apply for a repayment extension when you face unexpected financial hardships, such as job loss, medical emergencies, economic downturns, or other significant challenges affecting your ability to make loan payments.
The extension allows you to delay loan repayments for a specified time, usually without incurring late payment penalties.
The missed payments are typically added to the end of the loan tenure.
If the extension is approved and properly reported by your financial institution, it should not negatively impact your credit score.
However, any missed or late payments before the extension may have already affected your credit.
Yes, during the extension period, interest on the loan may continue to accrue. This means you could end up paying more interest over the life of the loan.
It’s crucial to understand the total cost of borrowing with the extension factored in.
