There is a big difference between a licensed moneylender and a loan shark. This is where you need to be aware and be cautions not to fall into some of these traps that might cause you more stress than before.
Licensed Money Lenders
The way licensed moneylenders operate are very straight forward. You will approach them to ask for a loan usually for a short-term. They will then need to:
- go through a simple screening process
- ask you for a few documents
- do a credit check
- and several other short procedures
After that, the process is over. This means that you will most likely go through something similar to how it is when you borrow from a bank, just more stripped down and straightforward.
How to tell the legitimacy of the money lender?
Basically, there are a few ways to find out if the moneylender is legitimate. In Malaysia, borrowing money from licensed moneylenders are governed under the Moneylenders Act 1951. This means that there are certain laws and regulations that ensure that you are not at a disadvantage when you borrow from these parties.
Here are some pointers:
- First, check the list of registered licensed moneylenders. This registry falls under the purview of the Ministry of Urban Wellbeing, Housing and Local Government. If the name is not there, then you MUST NOT borrow from them!
- Once you have decided who to borrow from, you can then approach them.
- In your meeting, you will be ‘interviewed’ for the reasons and such before being asked to sign an agreement. It helps to be diligent at this point and read the clauses very carefully.
Even if the moneylender is registered and fully legitimate (registered with the Ministry), WALK AWAY if you experience the following:
- The moneylender’s attitude is rude and somehow threatening
- Your questions are not answered properly at times being dismissed or evaded
- You are asked to sign something you are not comfortable with, like a blank document
What is our role?
How we fit into your plans are simple. We want to help you make the loan application as straightforward as possible and to ensure that you do not have to go through the cumbersome often tedious process as we know it is already a big decision to borrow money. We know that most borrowers appreciate confidentiality and we respect that.
So, how do you borrow money?
As mentioned, you will first need to go through the register. Make a shortlist of a few that you might be interested in based on convenience and maybe after a quick background check of the companies. Take note: Moneylenders in Malaysia are not allowed (by law) to advertise their services. Do not call numbers you see on advertisements.
Once you have chosen the moneylender of your choice, you can get down to your application procedure. If you have borrowed any type of loan from the banks before, chances are you will find this process quite familiar. First, complete the online loan enquiry form that they usually provide. Otherwise, you can fill up the form with us and then an appointment will be set up.
Your loan application should be processed and approved quite quickly, most likely at your first meeting. However, you need to furnish the important and relevant documents like your payslip, employment status, personal contact information and any other supporting documents that they will need. It helps that you call them beforehand to find out what documents are needed to avoid having to make the round again.
The legal and registered moneylender will usually have many loan options for you to choose from. This could come in small to large or short to middle term loans. It could be a personal, business, payday or other loans that you might need to get by a few weeks or months.
Go through all the packages that they have but most of their interest rates are quite standard. Once you have decided which loan package to take, then enquire further before making the final decision to sign on the dotted lines.
Responsibilities and Roles of a Borrower
You would have asked many questions before making the decision to borrow money. These questions are not easy to answer, and you know you have to bear the responsibilities (and consequences). Borrowing money is a commitment that will tie you down in many ways because once you are in debt, it is difficult to get out.
Not as simple as just yes or no
Several factors come into play when you are in need of cash. And it is never a straightforward process. The most common and easy method is to take out a loan. But do you know that it is not just saying yes or no? Do you know what are you getting yourself into and what you are expected to do?
Factors to consider
Before you start weighing your options, be aware that the number of bankruptcy cases has been increasing every year. Those who have just graduated and started working are spending more than they are earning and taking loans to pay off their credit card and personal loan debts. Hence, if you are going to borrow the money you must be very sure to get into a term-based commitment. The factors that you should prioritize:
- Type of loan: The reason you need the loan for will determine which type of loan you are looking for. It can be a personal loan, a business loan or a credit card (usually for purchases).
- Interest rate: This includes types of interest rates (flat or floating), the current rate
- Duration: How long are you ready to go into this commitment? The longer your term is, the more you are paying in interest.
- Bank or financial institution: Which firm gives you the best interest rate and most convenient. It is absolutely NOT advisable to turn to loan sharks or money lenders.
- Do you really need to borrow the money now?
You took the loan. What’s next?
The most crucial thing that you must do after your loan has been approved is to service the loan. You would have by now worked out a payback schedule at your end. Your job from here now:
- What is the monthly payment amount? For loans, the amount is quite fixed. For credit cards, there is a minimum amount set.
- When is the due date? Take note of the date and make your payments on time which means before the due date. Late payments will incur additional interest and damages your credit ratings.
Will it implicate your credit score?
When you take a loan from a bank, it will be recorded in your CCRIS (Central Credit Reference Information System). If you default in any payment, it will be reflected in the system as well. This means that you must ensure there are no negative marks in your CCRIS as it might affect your future loan applications. The model is straightforward and simple.