When we talked about loans, many of us may have had nightmares about the interest fees charged and how we could pay those loans on time every month without jeopardising our savings. Having loans is a good thing. However, it could be a dangerous game if you missed your loan payment. One late payment can leave a significant impact on your credit score but it is not impossible to manage. In this article, let’s have a good look at how loans work and what other options you have for managing your loan.
What is a loan?
A loan is simply money borrowed with the promise of repayment over a set length of time (tenor). The lender sets a fixed interest rate that you must pay on the money you borrow, as well as the principal amount.
Type of loans
There are many different sorts of loans accessible in Malaysia, and they are divided into two categories based on the purpose of the loan:
Secured loans
These are loans that don’t demand any kind of security. The lender lends you money based on previous relationships, your credit score, and your credit history. To qualify for these loans, you must have a strong credit history. Due to the lack of collateral, unsecured loans normally have a higher interest rate.
Personal loans, Flexi loans, short-term business loans, school loans, and auto loans are examples of unsecured loans.
Unsecured loans
Interest is essentially a charge to the borrower for the use of an asset like cash, consumer goods, vehicles, and property. When you borrow money, you must repay the amount borrowed plus interest, which is normally spread out over the loan’s duration.
You can get a loan for the same principal amount from different lenders, but the interest rate and/or term differ depending on what is offered by the lenders.
Understanding the interest rates
Interest is essentially a charge to the borrower for the use of an asset like cash, consumer goods, vehicles, and property. When you borrow money, you must repay the amount borrowed plus interest, which is normally spread out over the loan’s duration.
You can get a loan for the same principal amount from different lenders, but the interest rate and/or term differ depending on what is offered by the lenders.
What happens if you don't pay your loan?
You will have to bear more cost
If you start skipping loan payments, you’ll start incurring extra fees, whether it’s a mortgage, a vehicle loan, or a personal loan. Banks are allowed to charge you interest based on the rate you agreed to during your application as a result of your missed payments.
Let’s say you borrow RM50,000 from the bank for one year. Your interest rate per annum is 4%, which makes your monthly repayment RM8666.67. Now, your late payment charges is 7% per annum. If you are late for over twenty days of repayment, the amount charged would have balloon up to RM191.78. Bear in mind that this will only increase your debt in future.
No more financial help from the bank
The same is true for personal loans and house loans when it comes to growing interest rates. While not all banks do this, the majority do so to encourage you to pay your bills on time.
Your credit score would be completely ruined at this point. It’s awful to think you won’t be able to get any financial assistance when you need it. However, because of the missed payments, lenders will view you as a high-risk borrower, and you will not be able to obtain financial assistance from any licensed lender at this time.
This is typically the turning point for borrowers to turn to Ah Longs, and we’re sure you’ve seen enough TV to know how that ends up.
Is it good enough if you make a minimum payment?
The smallest monthly payment you can make without incurring penalties on your debt is the minimum payment. The minimum payment is calculated differently by each creditor. The majority of minimum payments are based on a percentage of the total debt.
Minimum payments keep your account in good standing, but they are the slowest and most expensive way to repay your debt. Making minimum payments helps you avoid late fees, negative marks on your credit report, and keeps your creditor happy. It can, however, save you money on your debt, make it take longer to pay off your debt and lower your credit score.
Why Is It Good to Pay Your Loan with Credit Card through jomSETTLE™
Always paying your loan on time is easier said than done. Especially, if you are heavily dependent on a single source of income. Not to mention all the other possibilities such as family emergency, economic crisis, or failure of investment that could happen that might affect your ability to repay your loan on time.
This is where credit cards could help change the game. Through jomSETTLE™, you can choose to pay your loan using your credit card. You tell us the details of your loan together with your loan agreement. You then checkout using your credit card and we will make a bank transfer to your bank within 3 working days.
This way, you can still make your loan payment on time even when the unexpected happened. Better still, when used correctly based on your bank statement, you will have up to 45 days float time before you need to repay your credit card.
Learn: Understanding Your Credit Card Statement and How to Use it with jomSETTLE™
With more options available for you, you can avoid going to cash advance to withdraw money directly from your credit card which charges you a 5% transaction fee and 18% late charges per annum. jomSETTLE™ only charges you 2.5% per transaction and it does not hurt your credit card when you repay your card within the settlement date.
Conclusion
For decades, loans are considered essential in life as we will need them to buy our car, house, or even to expand our businesses. But if manage wrongly, it will bring down our financial status faster than you think. This is why credit cards could be a good alternative to settle your loan on time as they could help avoid getting penalties.
But do bear in mind that repaying your credit card on time is also equally important. Do not take the credit limit as extra cash for your spending. It is simply a facility extended to you by the banks to help you manage your cash flow better.
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When we talked about loans, many of us may have had nightmares about the interest fees charged and how we could pay those loans on time every month without jeopardising our savings. Having loans is a good thing. However, it could be a dangerous game if you missed your loan payment.
One late payment can leave a significant impact on your credit score but it is not impossible to manage. In this article, let’s have a good look at how loans work and what other options you have for managing your loan.
What is a loan?
A loan is simply money borrowed with the promise of repayment over a set length of time (tenor). The lender sets a fixed interest rate that you must pay on the money you borrow, as well as the principal amount.
Type of loans
Secured loans
Collateral loans are those that require you to put up an asset as collateral for the money you’re borrowing from the lender. If you are unable to repay the loan, the lender will still be able to recover some of their funds. The interest rate for secured loans is usually lower than on unsecured loans.Home loans, gold loans, loans secured by insurance policies, and loans secured by mutual funds and stocks are all examples of secured loans.
Unsecured loans
These are loans that don’t demand any kind of security. The lender lends you money based on previous relationships, your credit score, and your credit history. To qualify for these loans, you must have a strong credit history. Due to the lack of collateral, unsecured loans normally have a higher interest rate.Personal loans, Flexi loans, short-term business loans, school loans, and auto loans are examples of unsecured loans.
Understanding the interest rate
You can get a loan for the same principal amount from different lenders, but the interest rate or term differ depending on what is offered by the lenders.
What happens if you don't pay your loan?
If you start skipping loan payments, you’ll start incurring extra fees, whether it’s a mortgage, a vehicle loan, or a personal loan. Banks are allowed to charge you interest based on the rate you agreed to during your application as a result of your missed payments.Let’s say you borrow RM50,000 from the bank for one year. Your interest rate per annum is 4%, which makes your monthly repayment RM4333.33. Now, your late payment charges is 7% per annum. If you are late for over twenty days of repayment, the amount charged would have balloon up to RM191.78. Bear in mind that this will only increase your debt in the future.
No more financial help from the bank
The same is true for personal loans and house loans when it comes to growing interest rates. While not all banks do this, the majority do so to encourage you to pay your bills on time.Your credit score would be completely ruined at this point. It’s awful to think you won’t be able to get any financial assistance when you need it. However, because of the missed payments, lenders will view you as a high-risk borrower, and you will not be able to obtain financial assistance from any licensed lender at this time.This is typically the turning point for borrowers to turn to Ah Longs, and we’re sure you’ve seen enough TV to know how that ends up.
Is it good enough if you make a minimum payment?
The smallest monthly payment you can make without incurring penalties on your debt is the minimum payment. The minimum payment is calculated differently by each creditor. The majority of minimum payments are based on a percentage of the total debt.
Minimum payments keep your account in good standing, but they are the slowest and most expensive way to repay your debt. Making minimum payments helps you avoid late fees, negative marks on your credit report, and keeps your creditor happy. It can, however, save you money on your debt, make it take longer to pay off your debt and lower your credit score.
Why Is It Good to Pay Your Loan with Credit Card through jomSETTLE™
Always paying your loan on time is easier said than done. Especially, if you are heavily dependent on a single source of income. Not to mention all the other possibilities such as family emergency, economic crisis, or failure of investment that could happen that might affect your ability to repay your loan on time.
This is where credit cards could help change the game. Through jomSETTLE™, you can choose to pay your loan using your credit card. You tell us the details of your loan together with your loan agreement. You then checkout using your credit card and we will make a bank transfer to your bank within 3 working days.
This way, you can still make your loan payment on time even when the unexpected happened. Better still, when used correctly based on your bank statement, you will have up to 45 days float time before you need to repay your credit card.
Learn: Understanding Your Credit Card Statement and How to Use it with jomSETTLE™
With more options available for you, you can avoid going to cash advance to withdraw money directly from your credit card which charges you a 5% transaction fee and 18% late charges per annum. jomSETTLE™ only charges you 2.5% per transaction and it does not hurt your credit card when you repay your card within the settlement date.
Conclusion
For decades, loans are considered essential in life as we will need them to buy our car, house, or even to expand our businesses. But if manage wrongly, it will bring down our financial status faster than you think. This is why credit cards could be a good alternative to settle your loan on time as they could help avoid getting penalties.
But do bear in mind that repaying your credit card on time is also equally important. Do not take the credit limit as extra cash for your spending. It is simply a facility extended to you by the banks to help you manage your cash flow better.
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MAZER FINTECH SDN. BHD. (1332779-U)
Unit A 806, Block A, Phileo Damansara 1, Jalan 16/11, Off Jalan Damansara, 46300 Petaling Jaya, Selangor
care@jomsettle.com
Terms & Conditions | Privacy Policy © 2023 Mazer Fintech Sdn Bhd. All right reserved.
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