Are you considering applying for a personal loan without a payslip in Malaysia? Before you proceed, it’s first crucial to understand the process and what to expect.
In this article, we delve into the role payslips play in loan applications and shed light on how to secure a personal loan without a payslip.
We aim to arm you with accurate and helpful information, enabling you to make a well-informed decision about your financial future.
Why is a Payslip Important in a Loan Application?
When applying for a loan in Malaysia, there are several documents that banks require from borrowers to assess their ability to repay the loan.
One of the most important documents is the payslip, which serves several essential purposes in a loan application process:
1. Employment Verification
Your payslip doesn’t merely state your income; it’s a testament to your regular earnings. Whether you receive your pay monthly or bi-weekly, the frequency and consistency are what banks look for.
Additionally, the background of the company you work for may impact the bank’s assessment of your application.
Payslips typically include the company’s registration number. Through this number, banks can assess whether your company is profit-making or running at a loss.
If you’re employed by a company that is incurring losses, it might decrease your chances of securing a loan. The industry you work in can also be a determining factor.
For instance, during the COVID-19 pandemic, banks were hesitant to lend to employees in the airline sector as well as those in the hotel industry.
This caution stemmed from the heightened risk of employees in these industries being laid off.
On the other hand, individuals associated with renowned organisations may find themselves perceived as having an added layer of job security, making them favourable candidates for lending.
2. Creditworthiness
Beyond just employment details, your payslip also proves your creditworthiness.
A regular and substantial income showcased in your payslip can influence financial institutions to view you as less risky.
This may lead to more favourable loan terms, for example, lower interest rates and higher loan amounts.
3. Loan Affordability
Finally, one of the most crucial aspects of a loan application is figuring out how much money you can borrow. The payslip is crucial for this.
It shows how much money you make and how much you have to pay for your monthly expenses.
Banks use this information to determine if you can manage the loan. It also helps them decide the most you can borrow, ensuring it matches what you can afford.
Read More: Refinancing Costs: Understanding the Total Costs of Refinancing
Why You Might Not Have a Payslip in Malaysia
Payslips are crucial for many employees; however, there are instances where one might not receive this document. Such situations include:
1. Self-Employment & Freelancing
Self-employed individuals and freelancers operate outside the conventional structure of a regular employee-employer arrangement.
For example, they do not have an employer providing regular monthly payslips like salaried workers do.
Instead, they are responsible for managing their own work schedules, cultivating client relationships, and overseeing their financial affairs.
However, since they’re their own bosses, there’s no external entity to provide them with a payslip, a standard form of income proof in many salaried jobs.
Furthermore, the income of self-employed individuals and freelancers is inherently unstable and unpredictable.
It’s not uncommon for them to secure a significant income from a project in one month only to experience a financial drought the following month.
2. Informal Employment or Unregistered Businesses
Informal employment is characterised by jobs that aren’t legally recognised or protected.
Such roles often go unrecorded in official databases and typically lack standard employment contracts or benefits.
Additionally, many in this sector receive non-standardised cash payments without documentation.
Consequently, the lack of official pay records or payslips creates hurdles for these workers in verifying their consistent income, thereby posing challenges when they seek to access formal financial services.
Read More: Cash-Out Refinancing Malaysia: The 4 Advantages You Should Know
How To Apply Personal Loan Without a Payslip in Malaysia
While acquiring a personal loan without a payslip can be difficult, there are several approaches you can explore to address this situation. Here are four examples:
1. Apply with a Co-Signer
One practical approach to securing a loan without a payslip is to apply with a co-signer.
This should be someone who believes in your ability to repay the loan despite not having a traditional payslip.
It’s essential that the co-signer has a stable income and a strong credit history, as the bank will take their financial standing into account during the loan application process.
If the loan is approved, the co-signer then vouches for you and lends the loan amount for your intended use.
However, it’s crucial to understand that this places a significant responsibility on the co-signer.
Should you default on the loan, their credit score and overall financial health could be adversely affected.
2. Provide an Alternate Proof of Income
Another approach to overcome the challenge of not having a payslip when applying for a personal loan is to provide an alternative proof of income.
This entails a unique strategy where individuals can engage their friends or family members who run their own businesses to help establish a verifiable source of income.
By doing so, applicants can bypass the need to involve agencies that might charge for their services.
However, this strategy demands that specific criteria be met to ensure the credibility and authenticity of the income source. Examples include:
- Be registered and profitable, as verified by the Companies Commission of Malaysia (SSM).
- Have an active website.
- Maintain a Google Business Profile.
- Showcase a presence on social media.
- Possess a fixed-line telephone number.
The most important part of this plan, however, lies in the business’s financial health. It should consistently generate sufficient revenue to support the salary declared for the loan application.
For example, if the business’s monthly sales total RM20,000, and you intend to portray a salary profile of RM10,000, it might not be suitable for this purpose.
Even if this arrangement continues for six months, the income profile might not be graded as top-tier.
This is due to the difference between the expected profile and the actual money earned.
3. Build & Maintain a Good Credit Score
Having a good credit score is necessary to strengthen your financial credibility, which, in turn, increases your likelihood of successfully securing a personal loan.
This strategy involves consistently demonstrating responsible credit behaviour, thereby showcasing your ability to manage borrowed funds responsibly.
To accomplish this, there are several key actions you can take, such as:
- Ensuring prompt payments for your existing loans, credit cards, and bills as it demonstrates your reliability and financial stability.
- Keeping your credit utilisation ratio low, ideally below 30%, to show that you have good control over your spending.
- Regularly reviewing your credit report to identify any errors and rectifying them by contacting the relevant credit reporting agencies.
- Clearing outstanding debts to lower your debt-to-income ratio and present yourself as a responsible borrower.
Read More: Debt Consolidation Malaysia: Unlock Your Home Equity to Consolidate Debts
How Bluebricks Can Help You Apply for a Personal Loan Without a Payslip
For those seeking expert guidance in applying for a personal loan without a payslip in Malaysia, Bluebricks can help!
As a specialised bank loan and debt consolidation agency, we offer an array of services ranging from:
- Personal loan rejected services
- SME loan rejected services
- Mortgage loan rejected services (for buying a new home, refinancing and cashback purposes)
- Collateral loan services
Personal Loan Rejected Services
More than just loan provision, our personalised consultancy service also sets us apart from the rest.
With a deep understanding of individual needs, our experts tailor advice based on various factors, including:
- 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 Without Payslip – FAQs
Navigating personal loans can sometimes be complex, especially when faced with the unique circumstance of not having a payslip to provide as standard documentation.
In this section, we’ve assembled a set of frequently asked questions to clarify the process of securing a personal loan without a payslip.
Yes, it is possible to obtain a personal loan even without a payslip and with a lower salary.
However, securing approval might be more challenging, and you may be required to present other documents to verify your income.
You can also explore financial institutions that offer personal loans without needing a payslip, such as online lenders.
But, it’s important to note that they might charge higher interest rates than traditional ones.
The loan amount you might qualify for without a payslip is typically lower than what you’d be eligible for when presenting traditional income verification. This is because when banks lack tangible evidence, like a payslip, they perceive a higher level of risk in offering the loan.
Therefore, by providing traditional income verification, you give the bank a clearer picture of your income stability, thus potentially increasing the loan amount they’re willing to extend.
Yes, there are several risks of getting a personal loan without a payslip, including:
- Higher interest rates.
- Shorter repayment terms.
- More stringent eligibility requirements.
- Increased chances of defaulting on the loan.
As a result, if you are considering getting a personal loan without a payslip, carefully weigh the risks and benefits first. You should also make sure that you can afford the monthly payments.
