Types of loans & Funds available in Malaysia


According to Oxford Learner’s Dictionary, loan refers to something that is borrowed especially money. In short, loan simply means debt. After a specific period of time, loan requires redistribution of financial assets. The process of loaning begins when an individual or more commonly known as the borrower acquires an amount of money from lender/principal. Bear in mind that over time, borrower must repay an equal amount of money or sometimes including interest.

In most situations, borrower will return the money on a regular basis called installments. Each payment made must carries the same amount. As mentioned previously, borrower must repay the loans together with interest which serves as an incentive between both parties.

When a borrower receives an amount of money from a legal firm, he or she must sign a contract that will list down obligations and restrictions called loan covenants. Basically, there are several types of loans available for borrower. Loans are usually categorized under secured or unsecured loan.

Secured loan

The term ‘secured loan’ refers to loan in which borrower pledges some asset in return for the loan. These assets usually come in the form of property to ensure that the borrower has the capability to repay it in a specific time in the form of monthly installments. In addition to that, borrowers will also pledge car as collateral for the loan.

Perhaps, one of the most widely known debt instrument is the mortgage loan. Mortgage loans are frequently used to purchase housing. The specific amount of loan is used to pay off the property. However, in most of these cases, lender or financial firms are given security which is lien on the title to the house. The lien is active right until the mortgage is paid off. Thus, when the borrower lost the ability to pay installments, then financial firms have the rights to reclaim the ownership of the property and sell it to regain the specific sum.

In some situations, borrower may use up the loan to purchase car. The obligations and restrictions for purchasing a car is similar to mortgage loans. However, duration of loans for car is much shorter compared to mortgage loans. Financial firms such as banks usually offer two types of auto loans namely direct and indirect.

Bank gives loan directly to borrower for direct auto loans while indirect auto loans is whereby car dealership acts as an intermediary between the customer and financial firm. Among other secured loans available are stock hedge loan, pre-settlement loan and recourse note. Stock hedge loan is a type of security lending in which borrower’s stock is hedged by the lender should the lender suffer loss while pre-settlement loan is a type of non-recourse debt whereby monetary loan is awarded during a lawsuit case. However, pre-settlement loan is only available in several lawsuit cases. Lastly, recourse note is used in most of the limited partnership agreements.

Unsecured loans

Unsecured loans are totally different from secured loans whereby monetary loans are not secured with borrower’s assets. There are several unsecured loans namely credit card debt, personal loans, corporate bonds, bank overdrafts and also credit facilities. Usually, rates for these loans vary as it depends solely on the lender.

Five types of financial loans by SME Bank

SME Startup

SME Startup is a type of financial loan suitable for entrepreneurs who would like to venture into manufacturing and also manufacturing-related services industry in Malaysia. The loan dispersion depends on the size of your company ranging from micro, small to medium. In order to be eligible for SME Startup loans, borrower must think and create a unique idea and explain how it can turn into a profitable and rewarding business operation. The financing limit as pre-determined by SME is up to RM10 million. However, the loan amount is subjected to terms and conditions.

SME Franchise

To venture into franchising industry, it requires large amount of capital as it covers the rights to sell particular product and service that comes together with basic training and workshops to help beginners to flourish the business. However, conducted correctly, franchise often gives you rewarding returns in a specific period of time. Thus, you need to run the business properly and pay attention in every single detail by acquiring guidance form Master Franchisor. Again, the biggest challenge to start up the business is to have capital. SME Bank is here to help you solve the matter and it offers up to RM3 million subjected to terms and conditions.

SME Professional

Unlike SME Startup, SME Professional is designed for the growing services sector in the country. According to a research conducted by an independent company in Malaysia, service sector by far is one of the fastest growing industries overtaking other sectors namely manufacturing sector in the past few years. SME offers loan up to RM10 million which is also subjected to terms and conditions. The introduction of this package is meant to assist entrepreneurs to set up their business in this sector.

SME Procurement

SME Procurement offers financial loan up to RM50 million will definitely help Original Equipment Manufacturers (OEMs) to compete against other conglomerates in the sector. In order to remain strong in the market, corporations need extra capital investment to expand the business. Thus, SME Procurement is here to help out those in need in terms of purchasing more equipment, hiring more skillful manpower and also to flourish the business.

SME Global

Lastly, the emergence of SME Global loan is meant to help ambitious young Malaysians to achieve their dreams of expanding and venturing into international market. Part of Ninth Malaysia Plan encouraged operators to venture into overseas market to help build reputation and image in international arena. Thus, SME Global offers up to RM50 million to facilitate companies in this specific area.

Student Loans

Perbadanan Tabung Pendidikan Tinggi Nasional Malaysia (PTPTN) is a type of student loan that was established in 1999 that aims to assist students who have gained entry into colleges, universities and also other higher learning institutions but yet faced financial difficulties to settle the tuition fees. Regardless of gaining entry into public or private institutions, students from all races and background are eligible to apply for the loans.

Borrower/ students are required to sign an agreement or contract that includes methods of repaying the loan upon completion of their studies in the higher learning institutions. Installments are made through Lembaga Hasil Dalam Negeri (LHDN). In addition to that, students are required to repay the loans six months after graduation. Monthly installments also charge 4 percent of administration cost. Borrowers can also repay the loans via other methods subjected to PTPTN.

Usually, borrowers can apply for financial assistance from their respective college or universities. Study loan granted to individuals will be transferred directly to applicant’s bank account. In order to be eligible to apply for PTPTN study loan, applicants must be a Malaysian citizen, gained entry as a full time student for degree or diploma programme in selected institutions, must not have bond with other firms or bodies and also to pass evaluation of family’s minimum financial ability.

PTPTN grants approximately RM6,500 per annum for degree students in public institute higher learning institution, RM16,000 for degree students in private institute and also an additional of RM500 per annum for science stream students while diploma students will receive RM5,000 per annum regardless of enrolling as an Arts or Science stream student.

Astro Scholarship Award

Astro All Asia Network (Astro) offers Astro Scholarship Award to Malaysian citizens below the age of 35 at the time of application and most importantly, must be a qualified Astro Subscriber. Applicants must first gained entry into local universities recognized by Civil Service Department of Malaysia and pursue degree programmes in several fields namely Engineering, Computer Science, Science, Humanities and also Performing Arts.

Study loans granted by Astro covers tuition fees, lodging expenses, medical and health insurance, as well as travel and internship expenses. Successful applicants stand a chance to work for Astro. Being one of the region’s leading cross-media operators, the company has joint-venture with other publishers across the region for a variety of broadcasting, multimedia and Internet services.

Applicants must gained entry into these courses – Bachelor / Master of Engineering, Computer Science or Science related to media and broadcast technology including Computer Graphics; Bachelor / Master of Arts in Mass Communications, Psychology, Anthropology, Sociology and related courses in Humanities; Bachelor of Dramatic Art (Acting, Design, Production) in National Institute of Dramatic Art, Australia (NIDA) or any other reputable school of dramatic art and Bachelor of Engineering, Computer Science or Science related to media and broadcast technology including Computer Graphics.

Petronas Education Scholarships Program

Petronas Education Scholarships Program is designed to cater the needs of excellent academic students who have gained entry into undergraduate courses. When applying for the study award, students must ensure that they possessed outstanding Sijil Pelajaran Malaysia (SPM) results.

MNRB Scholarship Fund

MNRB Scholarship Fund that was wholly established by MNRB Holdings Berhad extends its invitation of offering scholarships for qualified students who have completed their SPM and STPM to further their studies in Matriculation, Diploma, First Degree and also Professional course on a full-time basis. Applicants can apply for the fund by submitting their SPM and STPM trial results.

Other Study Loans

Students who have completed their SPM or STPM are also eligible for other various scholarships offered by government bodies and private conglomerates namely International Medical University (IMU) Scholarships, Yayasan Khazanah Global Scholarship, Bank Negara Malaysia Scholarship Award, Fulbright Malaysian Graduate Study and Research Scholarship, King Abdullah University of Science and Technology Scholarship and many more.

Home Loan Types

Borrowers can choose from a wide range of home loan packages offered by banks that best suit their criteria. However, how do borrowers differentiate and distinguish the right home loans for them to purchase housing property? Here are several home loan types available in Malaysia complete with pros and cons.

Refinancing is one of the most popular home loan types in Malaysia as borrowers can save on interest rates besides reducing monthly installments that can be used during emergency.

Longest loan tenure is suitable for older borrowers and those who have insufficient retirement savings as it provide flexible ability to redraw the amount that you have paid into your loan. However, this loan type bears a major disadvantage as it charges penalty for prepayment fees.

Zero payment packages mean borrowers do not have pay a single penny while the property is still under construction. It is the perfect solution for those who have insufficient deposits but still wants to own personal property.

Fully revolving credit loan is the best loan as it is available for any interested home buyer. It covers free personal accident insurance and also offers borrower flexibility to prepay and redraw as much as they desire. However, in some cases, this loan charges higher interest rates.

One hundred percent margin of finance is suitable for those who are in need of cash at the beginning of the purchase procedure. This loan has several disadvantage whereby it charges high margin and also slightly higher interest rates than expected.

Deposit Linked Flexi Home Loan is suitable for individuals who are in need of cash at times and also have excess cash in other situations. The loan works in a simple method – the more money you have in deposit, the lower interest rate you are required to pay for the loan. Borrowers enjoy the flexibility to withdraw money whenever they want.

Fixed Rate Loan is catered for those who values certainty in monthly installments. Besides, borrowers also enjoy the lowest fixed rate compared to other packages. However, insurance is compulsory for insurance lenders.

Islamic Home Financing appears to be more expensive, however, when observe clearly, partial lenders offer rebates to ease the burden. No penalties will be charged against borrower. It is the perfect solution for those who wish to have Syariah compliant financing.

Floating Rate Loan that charges lower interest rate is the best choice for most home buyers as the repayments are also lower. However, the installments may increase according to the current rates.

Investors Home Loan is suitable for individual buyers who wish to purchase the properties for a specific period of time and re-sell it later for a quick profit. Bear in mind that this package also has higher interest rates. However, this package offers you the flexibility to pay the loan and sell the property without charging penalties.

Low Deposit Loan is similar to 100 percent margin of finance. Suitable for those who have excess cash at times and also in need of cash in certain situations, borrowers enjoy flexibility to apply for a bigger share of home loan.

Lastly, Hybrid Loans provides certainty for a fixed period of time. It is the answer for those who think that interest rates may drop in medium term.

HSBC which is a famous world’s local bank offers home loans for qualified individuals and ensure that the borrower enjoy a string of great benefits throughout the loan duration. HSBC HomeSmart provides borrowers’ the flexibility to rearrange priorities according to their needs besides the excellent step-up repayment plan.

Mortgage One Home Loan by Standard Chartered provides borrowers the flexibility to settle the loan in half the time at half the cost. Mortgage One offers several advantages over other home loan packages offered by other financial banking firms – grants payment holiday, easy repayment options, borrowers can withdraw funds anytime and also lower interest charges. With Mortgage One, borrowers can invest in properties, refinance their homes, upgrade their current home and also buy the first home.

Corporate Loans

MBSB offers various corporate loans including term loan, bridging loan, mortgage loans and also combination of term & bridging loans. Mortgage loans offered by MBSB aims to assist entrepreneurs to purchase completed commercial properties such as office towers, budget hotels or shopping malls.

Debt, installments, interest, secured loan, unsecured loans, SME Startup, SME Franchise, SME Franchise, SME Procurement, SME Global, PTPTN, Astro Scholarship Award, MNRB Scholarship Fund, Petronas Education Scholarships Program, Home Loan Types, Corporate Loans

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