What is PTPTN Income Contingent Loan ?

Most of the Malaysian who study local universities will borrow from the National Higher Education Fund Corporation (PTPTN). Meaning all of those undergraduates are actually indebted when they further their tertiary studies. Well, this is consider a good debt instead if you finished your study and get a good job to repay back the loan later.

However, statistic shows that many of those graduates defaulted their PTPTN loan after graduating from universities. Few years back, government even reduces the loan interest from 3% to 1% p.a. but yet still no improvement. How about 20% discount if you settled off your loan in one lump sum?

Still not enough...

Another good news to PTPTN loan borrowers, government is introducing the new repayment term called "Income Contingent Loan", which allows borrowers to delay their repayments until they reach a certain level of income. Currently, loan borrowers have to start their repayments 6 months after finishing their study.

How much is the income threshold ?

This is the most crucial question after the announcement. So far, we still don't have the answer yet. And, this will definitely benefiting those low income graduates.

Anyway, there are more queries such as below:

• Would it be RM3,000 monthly income threshold ?
• Would it affecting the existing loan borrowers ?
• How about the schedule of repayments?

Understanding the NEW Base Rate effective Jan 2015

New year always come with some new changes. In 2015, we have this thing called "Base Rate" (BR) which will replace the previous Base Lending Rate (BLR) we commonly used for years. What does it mean? What are the differences? How much is the rate actually?

The new system of pricing...

With the new base rate, banks are allowed to price their loans products more efficiently based on their ability. How is the computation method being used for base rate? Read our previous explanation here...

The New Rate for different banks...

• * Indicative Effective Lending Rate refers to the indicative annual effective lending rate for a standard 30-year housing loan/home financing product with financing amount of RM350k and has no lock-in period.
• * Data sourced from Bank Negara Malaysia on 2nd Jan 2015.

The LOWEST Rate is Maybank?

Yes. Maybank set it's base rate to 3.20%, the lowest among all the banks currently. And, guess what? This was already explained and predicted by Finance Malaysia last year !!!

So, does it affect the existing loan borrowers?

No. The new base rate will only applies to those applying for new loans or refinance from 2nd Jan 2015 onward. So, the existing borrowers can rest assured that their loan rate still follow the existing terms and conditions.

BLR is follow the Bank Negara Malaysia OPR rate. How about BR ?

Good question. The previous BLR will fluctuate according to overnight policy rate (OPR) being determined by BNM from time to time. However, since BR depends on the bank's cost of funds and liquidity factors, it can be reviewed and fluctuate anytime to reflect such changes even if there is no changes in OPR. Don't forget the other factors such as statutory reserve requirement (SRR) being set by BNM also.

Any major different in terms of effective rate?

Referring back to the table shown above, the base rate doesn't mean everything. The most important thing borrower must know is the effective rate being charged. Take Maybank BR 3.20% as example, the effective lending rate was 4.55% actually for a 30 years loan. The effective rate generally depends on the loan amount and loan tenure. Lesser the loan amount and longer the loan tenure would lead you to higher effective rate.

Hope this article enlighten you...
Stay tune for more updates...

Is it Viable to opt for Fixed Rate Loan currently? (Oct 2014)

In anticipation of rising interest rate environment, would fixed-rate loans be a better option for borrowers? To recap, Bank Negara Malaysia, for the first time since 2011, raised the benchmark reference rate OPR to 3.25% in July 2014. While many anticipate that there will be another round of hiking soon, should loan borrowers opt for fixed rate loan?

What is Fixed-Rate loan?

By fixing your interest rate upfront, fixed rate loans protect borrowers from future increases in Base Lending Rate (BLR). In other word, the repayment amount will not be changed during the entire loan period.

Who is suitable for fixed rate loan?

Perhaps, if you are looking to avoid any volatility, in terms of interest rate movements, you may opt for fixed rate loan. However, it's not necessarily so in terms of paying lower interest rate. 

Why say so?

Normally, the interest rate on a fixed rate loan was set slightly above what you would be quoted for a floating rate. So, if the financial institutions expect rates to rise, they would quote higher fixed rates too !!! If you think you're clever, your banker also not stupid...

So, how to make decision?

To decide, one must know where are we today and how much more interest rates will rise. With the current BLR of 6.85% coupled with a discount of 2.4%, the net interest rate borrowers are serving now is 4.45%. As far as we know, the average fixed interest rate currently available is 5.00%, which is 55 basis points above current floating rate.

Based on historical OPR movements, there is just another 25 basis points to reach the pre-crisis level of 3.50%. Meaning, there is still another 30 basis points to go beyond the 3.50% OPR level before reaching the fixed interest rate. Since there is still a wide gap to reach the 5.00% level, it's not so attractive to take up fixed rate loan currently.

What do you think?

NEW Base Rate: Good or Bad ?

When Bank Negara Malaysia (BNM) announcing that the new Base Rate will replace the current Base Lending Rate (BLR) starting 2015, many people doesn't know what's that. Is it a good thing or is it just another gimmick to increase the lending rate?

Here, Finance Malaysia Blog hope to answer some of the queries posted by our followers...

First, let us figure out why BNM wanted to change the reference rate. It was being told that the objective is to promote better transparency, pricing discipline and efficiency among financial players.

Second, how was the new Base Rate being determined?

Third, good or bad ?

In fact, it was a good thing to retail borrowers since the new Base Rate would be partially determined by efficiency of financial institutions. Finance Malaysia opines that those big banks will have a better pricing power compared to smaller banks, because their cost of funding is usually lower via current/saving account (CASA). That's the cheapest cost of funding for any banks, other than Fixed Deposit.

Would it affect the existing loan borrowers?

This is the question most of us concerned about. But, BNM said the new Base Rate "should not" have an effective impact on existing loan borrowers. Of course, it was different story if the borrowers refinance their existing loan, either it's personal loan or housing loan.

3 Tighter Rules for Property Sector? (Sept 2013)

Prior to Budget 2014 (to be tabled next month), speculation has rift up on a few proposal to tighten the rules, especially on property sector. Following the outcry from public stating the alarming high property prices, measure should be taken to tackle the issue before bubble was formed.

The Bubbling Biz...

Among the measures being proposed were:

1. Non-other than Real Property Gain Tax (RPGT)
   
   
   
   
2. Higher Stamp Duty:
   ~ 5% of purchase price for 3rd property
   ~ 7.5% for 4th property
   ~ 10% for 5th property onward
   
   
3. Loan-to-Value ratio reduce to 60% for 3rd property onward
   
   

While the above info need to be ascertained further, some banks already implemented their in-house ruling. What's that? It was to limit the maximum term for refinancing of property to 10 years. Yes. Sooner or later, all of the banks will follow.

* Please note that the above 3 rules need to be ascertained further. Stay tune!

A Guide To Home Loan Refinancing

For those who have never been exposed to the concept of “refinancing”, home loan refinancing may seem like a baffling notion.  After all, what good could possibly come from getting a new home loan… just to pay off your old one? Wouldn't you just go back to square one after the whole process? These could be some of the questions you’re asking yourselves, and understandably so.

In reality, home loan refinancing is a widely-adopted practice with many potential benefits. Home buyers far and wide undertake it in order to lower the interest they’re paying on their home loans, reduce their monthly loan repayment amounts, and generally alter their loan terms to better suit their financial needs.  In fact, some even refinance to free up cash riding on the inherent values of their properties!

Want to refinance your home loan in Malaysia?
Click here to compare different rates by different banks.Courtesy of: iMoney.my

Latest BNM measures to Curb Excessive Household Debt (July 2013)

Hot from oven. Bank Negara Malaysia (BNM) today announce some measures to address the alarming household debt among Malaysians. As reported, household debts have continued to increase at a strong pace, averaging at an annual rate of 12% over past 5 years. While this has been supported by positive income and employment conditions, in the more recent period, there has been a growing trend in the offering of financial products that are not in the long-term interest of consumers.

What does this mean?

This includes extended financing tenures of up to 45 years for house financing and 25 years for personal financing!!! Wow... Is it too long the tenure? While this may reduce the monthly repayments, in the long run, this increase the overall debt burden of households. If we don't stop this kind of practice, it will encourage excessive debt accumulation by households and increase the vulnerability of this sector.

Hence, BNM has to take actions...

The implementation of a set of measures aimed at avoiding excessive household indebtedness and to reinforce responsible lending practices by key credit providers. These measures, which take effect immediately, complements the earlier measures introduced since 2010 to promote a sound and sustainable household sector.

What are the measures?

1. Maximum tenure of 10 years for financing extended for personal use;
2. Maximum tenure of 35 years for financing granted for the purchase of residential and non-residential properties;
3. Prohibition on the offering of pre-approved personal financing products.

Who will be affected the most?

For sure, borrowers (excessive one) will be short-handed. However, those good quality borrowers will not be affected. Meanwhile, the hands of financial institutions once again being tighten further. It will definitely impact the loans growth, but with a more quality growth. Property sector will face some minimal impacts, given most of the loan approved is within 35 years of financing.

For Finance Malaysia, this is good news for our country's financial sector. Excessive household debts, coupled with poor quality loans, will endangers the financial system. Worth to highlight here is the pre-approved loan is being banned now. Long time ago, Finance Malaysia is very uncomfortable with such offerings, with the intention to "indulge" bank clients to borrow. Now, we are relieve. Do you agree?

A Malaysian Guide to Home Buying Fees & Charges

Like any other country, buying a house and taking a home loan / mortgage in Malaysia involve legal fees & charges - which many people fail to take into consideration especially when they’re buying a property for the very first time.

So to all Malaysians buying your dream houses right now, allow iMoney to show you ALL the fees and charges involved when you buy a house or apply for a home loan.

Consolidating Credit Card Debt: 2 Easy Methods in Malaysia

Credit cards have become a part of life in Malaysia. But as much as they make life a lot more convenient; credit cards can also lead to an unmanageable amount of debt. In some cases, credit cards have even led to bankruptcies.

If you have a credit card debt that seems to be spiralling of control, it may be the right time to consider debt consolidation. In Malaysia, there are two common debt consolidation methods that are highly workable.

1) Credit Card Balance Transfer

Credit Card Balance Transfers involve the transferring of money that you owe on your current credit card account to a new credit card.

Balance transfers offer a number of different benefits, including lower interest rate and the ability to simplify your credit card debt payment process. 

How Credit Card Balance Transfers Can Work for Debt Consolidation:

●     If you have accumulated a significant amount of credit card debt, there is a good chance you are currently being charged the maximum interest rate. Based on the tiered interest rate structure adopted by banks in Malaysia, this maximum rate is generally 17.5% p.a.

●     If you are paying the maximum interest rate, you are probably finding it quite difficult to keep up with your credit card debts. High interest rates can cause your credit card balance to rise quickly. For example, if the amount you owe on your credit cards is RM10,000, you are essentially adding RM146 in interest to your debt each month.

●     A credit card balance transfer could give you a break from paying high interest. In some cases, you'll find balance transfer programmes that offer zero interest rate, at least for the first year or so. By taking advantage of one of these offers, you will have a better chance of paying your debt off.

●     Banks often charge a once-off fee of 3% when transferring a credit card balance. However, in the long run you will still end up paying less, due to the lower interest rate.

Example of How Much You Could Save:

Credit card average maximum interest rate = 17.5%

Lowest known interest rate for balance transfer (for a limited time) = 0%

Amount you could potentially save on interest (for a limited time) = 17.5%

2) Personal Loan

The concept of taking out a personal loan in order to pay off credit card debts might sound a little unusual. However, if you take a strategic approach by taking advantage of interest rate differences between personal loans and credit cards, this method can actually work quite well.

How Personal Loans Can Work for Debt Consolidation:

●     If you have accumulated a significant amount of credit card debt, there is a good chance you are currently being charged the maximum interest rate. Based on the tiered interest rate structure adopted by banks in Malaysia, this maximum rate is generally 17.5% p.a.

●     The interest rates on many personal loans are far lower than credit card maximum interest rates. For example, some personal loan interest rates in 2013 can be 9.88% p.a. or less, depending on your loan amount and term. If you are a government servant, the rate dives even lower.

●     If you take up a personal loan with significantly lower interest than a credit card’s, you could technically be paying much less over the long run. The savings you’re getting from your interest could even help offset the charges and fees associated with the application for a personal loan.

Example of How Much You Could Save:

Credit card average maximum interest rate = 17.5%

Known interest rate on a personal loan = 9.88%

Amount you could potentially save on interest = 7.62%

This article is brought to you by iMoney.my - the first website in Malaysia comparing credit cards, loans and mortgages - free of charge and independently.