Disclaimer: This article provides knowledge to readers which does not provide any advices to readers. The writer and the company of this article take no legal responsibilities for any usage of these methods. The readers should consult their financial adviser first before implementing any financial decisions.
An increase of cost of living and a staggering increase in salary create unintentional pressures among people. Sometimes, aid from third-party is much appreciated by people to prevent default. Of course, this does not come free. Borrowers require to repay the loans with interest to anyone who had helped them going through their hardships.
As loan scams are always a risk to borrowers, people who borrow money should be vigilant to scams tactics. They use a few methods to attract loan victims to make borrowings through them. Finally, they may not get a single cent on their loans, they will still need to repay the loan to prevent their names got blacklisted.
1. Beware of the word "blacklisted may apply"
It can be one of these occasions if you have seen the phrase "blacklisted may apply".
It can be just "too good to be true".
It can be an unlicensed financial institution which tries to charge crazy interest on you.
The Central Bank of Malaysia (BNM) has set guidelines on financial institutions. Besides its licensing requirement, a licensed financial institution can only charge a range amount of interest to their borrowers, even if the default risk of the borrowing person is high.
Mark it as the first red flag if the advertisement says "blacklisted can apply". If they charge a tremendous amount of interest on your loan (such as 5% per day or 30% per annum), report this to the Central Bank immediately.
Check if the financial institution is licensed from the Central Bank here.
2. It charges a high amount of interest
If you see the financial institution charges you a high interest, run!
The interest rate reference is available based on the market conditions. The Central Bank of Malaysia provides references to licensed financial institutions. The licensed financial institution provides the rate for themselves based on their risk exposure.
Again, check if the financial institution is licensed or not. If they are not, they will simply charge an amount that is baseless! (the current base lending rate is between 5% to 12% per annum, except for credit card loans)
3. Check the loan agreement before signing
Loan agreement is a legal-binding document. It is important to check every single clause in the document before signing the contract.
Contract Act 1949 protects us from being exploited. However, please do not take that for granted! Even though it is unfair to any party, as long as you have signed the contract, the contract is considered effective.
Once signed, you are bound to follow information mentioned in the contract. Failure in doing so may cause legal dispute filed by the counter-party(s).
4. Check if the loan is asset-locked
Asset-locked loans can provide lower interest rates on your loan. Bear in mind, asset-locked loans refer to loans which requires you to back your loans with your assets.
This is not a problem if you have stable income stream and affordable instalment payments. What if there is any problems on your income streams?
If the asset is backed on your loan, your asset can be confiscated if you could not provide instalment payments for a few times. Think thrice before you surrender your assets to back your loans!
5. Check the amortisation table for exact payment
Amortisation table is a table to know how much you are repaying on interest and principal. It is a good way to check if the loan agreement is not transparent enough to let you see through how you are paid.
You need to have this information to check whether you are paying high.
Principal borrowed initially (the amount borrowed)
Interest rate (for each and every period)
Instalment amount (the amount you pay every month)
If you are paying more based on the interest rate charged, the final period should give you a negative balance. You can ask them why they are asking you to pay that much. You may report to the Central Bank if you are not satisfied with the responses.
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