Want to renovate a home, start a business, or pay credit card bills? You may be planning to apply for personal financing.
However, you may not be so sure what it really is. There are many questions playing in your mind: What is the maximum amount available? What is the repayment period? Does the bank or financial institution require any collateral? Please read on to find out more.
Is it real?
Personal financing means where you can borrow a fixed amount of money from a financial institution for various purposes and agreed repayment terms complete with interest.
You might think, “It’s like other financial loans out there”. But in fact, it is not the same. If you look more closely at the details of personal financing, it actually illustrates the opposite.
For starters, personal financing is often in small or moderate amounts, if desired compared to home loans. Housing loans are set at a certain percentage based on the purchase price of the house, while personal financing is not fixed from RM2,000 to RM250,000.
Second, you do not need to provide various documents in support when you apply for personal financing and do not require any collateral as collateral. It is enough to provide a complete set of application documents and proof that you can afford to repay the financing.
Third, Malaysians can choose between conventional or shariah-compliant personal financing. Refunds with interest rate charges will be available for conventional personal financing, but shariah personal financing involves the financier buying a commodity on your behalf before you repay for the commodity over a period of time with a set profit rate. In addition, there is personal financing in Malaysia targeting those who serve the government, statutory bodies, or government-linked companies.
Fourth, there are interest rates and profits in personal financing. Neither the concept of conventional nor shariah financing has a fixed and floating interest rate or profit. Fixed-rate means that the rate is a fixed amount throughout the term of your financing, and it is calculated based on the initial amount of financing while the floating rate will often vary based on market conditions until the end of the financing period.
The fifth feature in personal financing? Ability to repay according to your convenience. When applying for personal financing, you are asked to choose a repayment period – a minimum of 1 year to a maximum of 10 years – that suits your financial ability for the nearest period of time.
Overall, personal financing is a small financial improvement that can be obtained for personal purposes, and as long as you are able to repay and meet the repayment terms, you don’t have to worry about other things. The same goes for shariah-compliant personal financing which requires you to fully comply with shariah.
Most importantly, remember that personal financing is about how you choose to use your money – and as long as you are aware of the products or habits you can afford to choose, you have been ahead in managing your personal funds prudently and will eventually provide convenience.
