Bank Loans and Credit
Managing Money Series
Debit and Credit Cards, Online Payments and E-Wallets
Bank, Bank Account and Online Banking
Saving & Budgeting
Protect Yourself From Scams
Understanding Insurance
What is a Bank Loan ?
A loan is when you borrow money from a bank. You agree to pay the bank back the money, little by little, which includes interest, every month. For example, if you want to buy a house that costs RM 300,000, but you don’t have enough money now, you can ask the bank for a loan. The bank decides how much money they can lend you, and you use it to buy the house.
What is Interest Cost?
Interest is the extra money you pay the bank for lending you money. It’s like a fee for using their money.
When you get a loan, the bank tells you how much interest per year you will pay. This interest is usually a percentage of the loan amount.
If a loan is not repaid on time, there may be more charges added to it.
What is a Credit Score?
A credit score is a number that shows how reliable you are at paying back money you borrow. It helps banks and lenders decide if they can trust you to repay a loan.
A credit score is sometimes also known as a credit rating. Your credit score is based on your credit history. Sometimes it’s also known as credit rating, your credit score is based on your credit history.
What is a Credit History?
A credit history is a record of all the money you have borrowed and how well you have paid it back. It includes:
- Loans: Money you have borrowed.
- Credit Cards: How you use and pay your credit cards.
- Missed or Late Payments: Any payments you did not make on time.
Why is a Credit Score Important?
If you have a good credit score, it might be easier to borrow money from banks. You might get better interest rates and terms for certain types of loans.
If you have a bad credit score, it might be harder to borrow money from banks. You might have to pay higher interest rates or could be denied a loan.
Consequences of a Bad Credit Score
- Harder to Get Loans : Banks might not want to lend you money.
- Higher Interest Rates : If you do get a loan, you might have to pay a higher interest rate, which means paying more money over time.
- Other Financial Challenges : You might have trouble renting a house, getting a job (as some employers check credit scores), or signing up for utilities like electricity and water.
How to Maintain a Good Credit Score
Pay Bills on Time
- Always pay your loans, credit card bills, and other bills on time.
- Late payments can hurt your credit score.
Use Credit Wisely
- Only borrow what you can afford to pay back.
- Don’t max out your credit cards.
Monitor Your Credit Report
Educate Yourself
- The Agensi Kounseling dan Pengurusan Kredit (AKPK) can be a valuable resource. They provide financial education modules, materials, and tips on proper credit use and money management for individuals and businesses, helping you build a better financial future.
How Can Bank Loans be Useful?
- Loans can give you money for a short time or a long time.
- Loans can help you buy something expensive, like a house.
Important Advice
Taking a loan is a big decision, if you are thinking about taking a loan, talk to someone you trust first.
How Does It Work?
Let’s say you want to buy a house in Malaysia. The house costs RM 300,000, but you don’t have all that money right now. You can get a loan from a bank to help you buy the house.
Here’s what might happen:
Getting the Loan
- You go to the bank and ask for a loan of RM 300,000 to buy the house.
- The bank will not give you the full amount. They will usually give you part of the money.
For example:
Loan amount: 75% of RM300,000 = RM225,000
Balance: RM300,000 – RM225,000 = RM75,000
Interest Rate
- The bank tells you their current interest rate is 5% per year.
- This means you pay 5% extra each year on the balance of the amount you borrow.
Monthly Payments
- You agree to pay back the loan over 10 years.
- The bank will tell you how exactly much you need to pay every month
Important Points to Remember
A loan can help you buy things you need, like a car or a house, if you don’t have all the money right now.
Remember
- Know the Cost Understand how much the loan will cost you each month and overall.
- Can You Afford It? Make sure you can afford the monthly payments.
- Pay Back on Time You have to pay back the loan with interest.
- Interest Adds Up Remember that the longer you take to pay back the loan, the more money you will pay overall.
Knowing this will help you make smart money decisions.
