Can you get a personal loan if you are ‘blacklisted’ or have a low credit score?

If you have had financial issues in the past and it appears on your credit report – are you still able to apply for a personal loan? The answer is – Maybe.

Different lenders interpret and evaluate the information in various ways. Typically, lenders take into consideration factors like your payment history (e.g. number of late or missed payments), your utilisation of your credit cards, loans that you have defaulted etc. These can be indications of poor money management which might eventually give them the impression that you have a bad credit.

However, if you have been rejected at one lender, it does not necessarily mean that the other lenders will turn down your application too. Some lenders might approve your application, albeit at a lower loan amount, longer tenure or even higher interest rates. Therefore, it is safe to say that it is subjective if your credit score is bad,

My credit score is bad, what does it mean?

Your credit score is a crucial factor that lenders consider when evaluating your loan application. A high credit score can increase your chances of getting your loan approved but a low credit score can turn out otherwise.

In Malaysia, the two of most prominent providers to obtain your credit profile or reports are CTOS and CCRIS. CCRIS is under the jurisdiction of Bank Negara Malaysia, while CTOS is a private credit reporting agency that operates under the Credit Reporting Agencies Act 2010. CCRIS collects information about individuals from financial institutions, whereas CTOS gathers information from various sources, such as the National Registration Department, the Companies Commission of Malaysia, and the Insolvency Department.

Financial institutions and lenders are not favorable of applications who show the following financial behaviours:

• High Debt Servicing Ration or DSR – As the definition shows, Debt Servicing Ratio measures the amount of borrowings you have over your net income i.e. how much your  monthly financial commitments is relative to how much you earn; A healthy DSR (monthly financial commitment/income) would be one that is below 60%.
• Missing or not paying your loan repayments – If you miss, are frequently late with, or default on your loan payments, your loan provider will charge you interest on the outstanding amount, and most likely a late fee. Your loan provider’s actions will be reflected in your CCRIS credit history, showing that you were behind on your payments. Payments that will flag up in CCRIS includes those from personal loans, home loans, car loans, credit cards as well as your PTPTN loans. A loan is a loan – and you still need to pay it back.
• If your CCRIS report shows that you have a “Special Attention Account”, financial institutions will not be allowed to lend you money. This typically indicates that a financial institution or a bank is closely monitoring your financial situation and may be in the process of recovering a loan, or even taking legal action against you.
• Multiple loan applications within a short period – You will be flagged as a high risk applicant by the financial institution or bank as you may be perceived as being desperate financially.

So back to the question, do you stand a chance to get a loan with bad credit score? You may still stand a chance of getting a loan approved. However, this is highly dependent on how you can demonstrate to the lender that you can pay your loan repayments on time. You can convince them by showing them that you have a strong and stable monthly income, having a permanent job with a large company. Saying this, the final decision will still lie with the institution that you are applying to.

Will taking a personal loan affect my credit score?

A credit score is a 3-digit number that that indicates borrowers’ credit worthiness. Is based on the borrower’s credit history, financial commitments as well as other factors like legal actions and trade references.  A good credit score can increase a borrower’s chances of getting a loan approved and is favoured by the lenders. A low credit score, however, may not be be favourable or get rejected.

Strictly speaking, taking out a personal loan will not affect your credit score. However, it is what you do with your monthly repayments that will. If you make prompt payments to your monthly commitments, a personal loan can actually help you improve your credit score. However, if your miss or make irregular repayments, this may actually hurt your credit score.

How do I improve my chances to get a personal loan approval?

Here’s what you can do to improve your chances of successfully getting the financing you need:

1. Check your Credit Report

A mistake like this can happen, where a lender may report that you are not making timely payments when in fact you have paid what you owe. This is why it’s important to regularly check your credit report.

Keep in mind that your credit report isn’t just affected by bank borrowings. Your CTOS bereau report also shows if any legal action has been taken against you, such as a suit filed by a telco or utility company to collect unpaid bills. If you want to dispute a claim made against you, you can request a data review with the credit bureau agency.

2. Clear all outstanding payments

If you have been late in your payments with your credit card bills, car or home loan repayments – please make sure you settle them as soon as possible.

Remember that your credit score is a major way that lenders determine whether or not you are a good paymaster. If you have a low credit score, it can be difficult to get a loan. This is because lenders may see you as a higher risk borrower who may have trouble making payments.

3. Be patient

When you pay off your debts and balances, it will typically take about 12 months for that information to be cleared from your record. In some cases, your only option may be to wait for that to happen.

4. Rebuild your credit standings

If you have the time and ability to do so, improving your credit profile is one of the best things you can do. This can involve paying your bills on time, keeping your credit utilization low, building up savings, and ensuring that your accounts are active. Doing this can lead to higher approval rates and lower interest rates on loans and credit cards.

To improve your credit profile, you should make sure to pay your bills on time, keep your credit utilization low (ideally below 20% to 30%), build up your savings, and ensure that your accounts are active. These are just some of the steps you can take to improve your credit.

5. Apply for a lower loan amount

Even if you want a large loan, the lender might be more comfortable lending you a smaller amount. If you are able to successfully repay this smaller loan, you will improve your credit profile and increase your chances of being approved for a larger loan in the future.

6. Strengthen your personal loan application

Personal loans are typically unsecured, but if you have poor credit, you may need to provide some sort of guarantee to the bank to improve your chances of being approved for a loan. This could include finding a guarantor, consignor, or providing collateral. You may also be able to pledge financial assets. While this may not always work, it’s worth trying if you need to get a personal loan.

7. Consider a longer tenure

When your earnings are low, you’ll need to keep your monthly installments low as well. With a longer tenure (and lower interests), you can stretch out repayments to make it more affordable in the long run. However, do note that the longer the tenure, the higher the interest costs overall.

Finally, if you have been rejected for all your personal loan applications, you need to take a serious look into your financial situation. Taking on more debt would not be the solution and you need to manage your money better or seek advice from the professionals (like AKPK) to help you improve your financials. We wish you the very best.

Borrowing from an Ah Long or Loan Shark vs a licensed moneylender

“Ah Long”, Moneylenders and Loan Sharks are often mixed up as the same category. Well, “Ah Long” and Loan Sharks are typically used to described unscrupulous lenders who charges unreasonably high interest rates and would threaten their customers if they do not pay up on time.

Licensed moneylenders in Malaysia, or known today as Credit Communities, are not the same as Loan Sharks. They are regulated by Kementerian Perumahan dan Kerajaan Tempatan (KPKT) with strict guidelines bound by the Money Lending Act 1951. According this act, licensed moneylenders can only charge a maximum of 12% interest per year for secured loans and 18% interest a year for unsecured ones. If you come across any moneylenders that charges higher than that, beware!

Beware when taking a loan from the “Ah Longs”

“Ah Long” and Loan Sharks normally operates illegaly and in the shadows. Many resort to threatening their customers like shaming their borrowers publicly and vandalising their properties like splashing paints on their cars or home entrance. It can be a very distressing situation.

Here are some clues that you can look out for to spot and avoid the “Ah Longs” or Loan Sharks:

1. Advertisements – Have you ever seen those posters on lamp posts, pillars that says “Easy Loan, Fast Approval, Call this number”? They are likely to be loan sharks. KPKT requires that all licensed money lenders display their lending license number visibly, together with their address, contact details and website information.
2. Unsuspecting messages – Many of these loan sharks send unsolicited WhatsApp or SMS messages offering loans. Ignore them.
3. They may appear friendly at the beginning but becomes aggressive if you can’t meet your payments
4. Extremely high interest rates
5. Asks for upfront payments before approving your loan and impose all sorts of hidden fees when you sign up
6. May approve your loan without asking you for your financial information like pay slips and bank statements
7. Does not offer any loan contract, or contracts that are poorly written with unclear loan terms
8. Harasses the borrowers, sometimes with violence and initimdating friends, families and neighbours to pressure the borrowers to pay their loan

As they often operate illegally, they will do whatever it takes to pressure you into settling your debt. There are many horror stories who fall prey into these loan sharks, do a quick google search and you’ll be able to find many articles on such cases online.

What is a money lender and how can you be sure if they are legit?

Licensed money lenders or credit communities, as they are known today, are regulated by Kementerian Perumahan dan Kerajaan Tempatan (KPKT). They are issued with a money lending license that has to be renewed by the lending company every two years. This license are governed by strict guidelines from the Money Lending Act 1951, which outlines a number of key ‘can dos’ and ‘can’t dos’, these include: –

1. The maximum interest rate for secured personal loan is 12% per annum or 1% per month
2. The maximum interest rate for unsecured personal loan is 18% per annum or 1.5% per month
3. The approval and disbursement of loans must be done in person, requiring physical verification (i.e. face-to-face) of the borrowers’ identity.
4. They have to evaluate the borrowers’ financial situation
5. They have to explain the terms and conditions of the loan agreement during the contract signing
6. Signing the loan agreement must be conducted in the office and registered business address of the licensed moneylender
7. They are not allowed to use compound interest or increase the interest amount when you don’t pay on time.
8. If the borrower misses their payments, they may send you reminders and engage a debt collecting agency or law firm to contact you

You can verify the legitimacy of the moneylender by checking the company’s registration number (SSM) on www.mydata-ssm.com.my and check on the Ministry of Urban Wellbeing, Housing and Local Government (KPKT) website on https://www.kpkt.gov.my/. If the company name is not there, this raises a red flag.

How to differentiate a licensed moneylender from a loan shark

Sometimes, it might be hard to differentiate a licensed moneylender from the loan sharks. And this often gives licensed moneylenders a bad name.

It is actually not that hard to find out if a moneylender is legit or not. Here are a couple of tips: –

A legitimate money lending company will be more than happy to share their details like their KPKT money lending license number, SSM registration number, their office address, website and contact details. On top of this, they would also be transparent to explain to you how the business operates and what the loan terms and conditions are. So don’t be shy to ask more details if you are in doubt.

Loan sharks on the other hand, may fumble if you ask them for such details or may just give you all sorts of excuses to divert your questions elsewhere. Many a time, they will also become impatient and might even start raising their voice. If they do, then you should hang up the phone or stop communicating with them.

Loan sharks or Ah Longs, may also first appear friendly and approves a borrower’s loan quickly. However, the telling signs start when they, start to ask for upfront fees often up in the hundreds of ringgit. When you show hesitance or turn down the offer, they might get verbally abusive and coerce potential customers to sign up for their loan.

Final Words

If you are in need of some fast cash, you should try and get some help from your friends and families first. If you do not want to deal with a bank and are considering getting taking a personal loan from either loan sharks or licensed moneylenders, it is obvious which one is the wiser choice. Ask them the right questions, do your research and if the moneylender you are dealing with makes you uncomfortable, the possibility of who you are dealing with is likely to be a Loan Shark.

Beware of money lending scammers

There are many scammer syndicates out there that poses as legit money lenders to lure unsuspecting applicants. If you suspect you have been approached by a scammer, please read on for more details.

This is normally how a scammer cheats their victims: –

1. They will use a fake website or social media account to advertise their personal loan services. We have identified these fake sites that posed as instaDuit or BB Capital, they are:  www.bbcapital.info and https://www.facebook.com/BB-Capital-Sdn-Bhd-108555301573303
2. Once the victims have provided their info, they will contact them claiming to be from ‘BB Capital Sdn Bhd’
3. They will only communicate with you via Whatsapp and voice notes, they would not answer any voice calls
4. Upon ‘approval’, they will ask the victims to pay for insurance coverage which in normally in the hundreds of ringgit
5. After that, the victims will be asked to transfer another sum of money to their account as pre-payment to proceed with the loan
6. These accounts are normally in the names of individuals instead of a company account. These are known as “mule” accounts that is used to receive and transfer funds acquired illegally on behalf others. If you suspect that these scammers are operating with a mule account, you can check this portal of the Commercial Crime Investigation Department of the Royal Malaysia Police.
7. They will intimidate and pressure the victims if they do not transfer the money. For example, they will threaten to blackmail the victims to disclose their information to the authorities although the victims have no wrongdoing.
8. Once the money is transferred, the scammers will disappear

There has been many victims who have been duped by such scammers and lost a lot of money.

As a licensed credit community, we do not request for any upfront payments nor request our customers to transfer any money to third party bank accounts. Additionally, instaDuit or BB Capital Sdn Bhd currently only serves customers in KL & Selangor.

If you are still unsure, please contact or whatsapp us at 017 215 9500 or click here for us to assist you.

If you suspect that you have been scammed, we suggest that you head to your nearest police station to make a police report.

How can I clear my debts quickly?

Are you struggling with mounting debts? You’re not alone! Many Malaysians face the challenge of managing credit card bills, overdrafts, and personal loans. But don’t worry, there’s hope! Here are some simple tips to help you get out of debt and achieve financial freedom.

1. Assess Your Debt Situation – Start by gathering all your debt statements – credit cards, loans, mortgages. Note down the outstanding amounts, interest rates, and minimum monthly payments for each.
2. Create a Budget – Establish a detailed budget to track your income and expenses. Identify areas where you can cut back to allocate more money towards debt payments.
3. Prioritize Your Debts – Target debts with the highest interest rates first. Paying these off faster will save you money in the long run. Make minimum payments on other debts while allocating extra funds to the highest interest debt. Pay off debts that have serious consequences if you don’t. For example, missing PTPTN payments can get you blacklisted, which is a big no-no.
4. Consider Debt Consolidation – Explore options to consolidate high-interest debts into a single lower-interest loan. This simplifies payments and might reduce your overall interest burden.
5. Increase Income – Find ways to increase your income, such as taking on a side job, freelancing, or selling items you no longer need. Direct this additional income toward your debt payments.
6. Snowball or Avalanche Method – Choose a debt repayment strategy: the snowball method by simply paying off the smallest debt first, then use the freed-up money to attack the next one. Think of it like saving up pocket money – slowly but surely, it adds up. Remember, the goal is to avoid paying unnecessary interest. Every payment you make, no matter how small, is a step towards financial freedom.The second method is the avalanche method where you focus on paying off debts with the highest interest rates.
7. Avoid Accumulating More Debt = Freeze credit cards, unsubscribe from tempting shopping emails, and practice responsible spending to prevent further debt accumulation.Only use your credit card if you have the funds to pay it off in full within the grace period. This helps you avoid those pesky interest charges.
8. Use Windfalls Wisely – Allocate unexpected money, like tax refunds or bonuses, directly toward your debt payments instead of splurging on non-essential items.
9. Seek Financial Guidance – Consider seeking advice from a financial advisor, a counselor or Agensi Kaunseling & Pengurusan Kredit (AKPK) . They can offer personalized strategies and help navigate complex financial situations.
10. Stay Motivated – Pay your debts on time to avoid late payment fees and additional interest charges. Set reminders, ask your spouse to help, or use a budgeting app. Track your progress regularly. Celebrate milestones, no matter how small, to stay motivated and focused on your debt-clearing goal.
11. Track your spending and identify areas where you can cut back – Every ringgit saved is one ringgit closer to becoming debt-free.
12. Sell Investments with low returns – If your investments aren’t giving you a good return, consider selling them to pay off your debt. This is especially true if your debt has a higher interest rate than your investment returns.
13. Reduce Savings (Temporarily) – While saving is important, sometimes it’s okay to put it on hold to focus on debt repayment. Remember, the interest you’re paying on your debt could be higher than the interest you’re earning on your savings.
14. Review and Adjust – Periodically review your budget and debt repayment plan. Adjust as needed based on changes in your financial situation or unexpected expenses.

Clearing debt is a journey that requires discipline, sacrifice, and patience. Your total debt payments should not exceed 36% of your gross monthly income. This ensures you have enough money left over for other essential expenses.By creating a clear plan, staying committed to it, and making necessary adjustments along the way, you can effectively clear your debt quicker than you might imagine. But by following these tips and staying committed to your goals, you can achieve financial freedom and live a stress-free life. Jom, kita sama-sama bebas hutang!

Don’t do this when applying for a personal

• Don’t apply for a loan without a clear purpose: Ensure you have a specific need for the loan and understand how you will use the funds.
• Don’t borrow more than you can afford: Calculate your monthly payments and ensure they fit comfortably within your budget.
• Don’t apply for multiple loans simultaneously: This can significantly harm your credit score and reduce your chances of approval.
• Don’t ignore credit card debt: Prioritize consolidating high-interest credit card debt into a personal loan for better financial management.
• Don’t hesitate to seek help: If you’re unsure about the process or need financial advice, consult a trusted financial advisor.
• Don’t provide false information: Always be truthful and transparent in your application to avoid potential legal issues.

By following these dos and don’ts, you can navigate the personal loan application process in Malaysia with confidence and make informed decisions that benefit your financial well-being. Remember, a personal loan should be a tool to empower your financial journey, not a burden to weigh you down.