(This article was originally published on the 17th of September 2017 and updated on the 29th of January 2021).
What is a Koperasi Loan?
A koperasi loan or cooperative loan is a type of personal loan offered to civil servants working in a federal or state government, municipal councils, statutory bodies as well as employees of selected government-linked entities. The repayment of koperasi loan is done through a salary deduction repayment scheme via Biro ANGKASA. Most of the koperasi loans are Syariah compliance.
Cooperatives that offer koperasi loan includes Co-op Bank Pertama, Koperasi Ukhwah, Koperasi Putri Terbilang (KOPUTRI) and Koperasi Bersatu Tenaga Malaysia Berhad (KOBETA). These cooperatives are registered under the Co-operatives Societies Act 1993.
Besides cooperatives, there are also ‘Yayasan’ or foundation that offers personal loans to civil servants. An example would be Yayasan Ihsan Rakyat or Yayasan Dewan Perniagaan Melayu Perlis. While Yayasan is not a co-operative, the personal loan offered by Yayasan has some similar features as koperasi loan, this includes the loan repayment is processed through a salary deduction repayment scheme.
There are also certain banks and local entities which partner together (e.g. Public Bank-MCCM Resources and Ambank-MCCM Resources) that provides personal loan with a salary deduction repayment scheme via Biro ANGKASA.
Key Features of Koperasi Loan
- Loan repayment is conducted through direct salary deduction via Biro ANGKASA or Accountant General; these two agencies have the mandate from the government to be able to make deduction from civil servants’ salary income. This is the reason why koperasi loan is offered to civil servants only.
- The total financing amount ranges from RM2,000 (minimum) to RM250,000 (maximum).
- The maximum financing tenure is 10 years or until retirement, whichever is shorter.
- Generally unsecured with no guarantor required.
- Most of the koperasi loan is offered to civil servants with full time permanent job status. Only a few co-operative that offers personal loan to contract status workers.
- The salary deduction allowed for koperasi loan cannot exceed 60% of the gross income. This means that in the salary slip of the civil servants, the percentage of net income should be at least 40%.
- Offers a multi-purpose loan which includes debt consolidation and loan restructuring, buying a home, buying a motorcycle, starting or expanding a business, paying up education, medical bills, etc.
Difference between Koperasi Loan and Commercial Bank Personal Loan
Although similar in many ways to a personal bank loan, a koperasi loan has a few distinct features:
|Koperasi Loan||Criteria||Commercial Bank Loan|
|Koperasi loan repayment is directly deducted from a borrower’s salary and processed by either the Angkatan Koperasi Kebangsaan Malaysia Berhad (Biro ANGKASA) or Accountant General’s (AG) department.||Repayment||A commercial bank personal loan is usually processed through auto debit or manual cash bank-in, although some banks also offer personal loan through salary deduction.|
|The tenure for koperasi loan is typically up to 10 years.||Tenure||Most commercial bank loan tenure is generally within 5 – 7 years.|
|Since repayment is made via direct salary deductions, the credit approval criteria for a koperasi loan is less stringent compared to personal loan from a commercial bank. A koperasi loan can even be approved for borrowers with a negative CTOS record, high commitment or those marked with a ‘special attention account’ in CCRIS.||Credit Criteria||Most commercial bank loans approval criteria is much stricter. Borrowers with an unfavourable CCRIS or CTOS history (loans unpaid more than 3 months), high commitment, or listed under Special Attention Account (SAA) would not likely get the loan approved; or if approved at a much lower approved amount or higher interest rate.|
|A koperasi loan interest rate is typically lower compared to the rate from a commercial bank. However, one will need to be aware of the payout amount of a koperasi loan, as many do not disburse 100% of the loan amount to borrowers. The payout can range from 80% to 95% depending on the cooperative itself.||Interest Rate & Payout||A commercial bank loan interest rate is usually higher compared to koperasi loan. The payout is close to 100% depending on the bank itself.|
|A koperasi loan is restricted to civil servants.||Type of Applicant||A commercial bank loan is open to private sector employees, self-employed as well as public sector employees.|
3 Reasons To Use Koperasi Loan
Here we would like to highlight the benefits of using koperasi loan or the 3 main reasons why you might want to consider getting a koperasi loan.
1. An alternative for unsuccessful applications from a commercial bank loan
Generally, a koperasi loan is more lenient in its approval process as compared to a commercial bank. This is mainly because of the repayment which is made via salary deduction (through Angkatan Koperasi Kebangsaan Malaysia Berhad (Biro ANGKASA) or the Accountant General’s (AG) Department). Many koperasi (Co-operatives) accept borrowers with no credit history or with a negative CCRIS or CTOS record (e.g. Special Attention Account or more than 3 months overdue loan payments).
Koperasi loan will also approve loans to those with a relatively high financial commitment. However, to ensure responsible lending, koperasi loan can only be extended where the salary deduction in the payslip is not more than 60% of the borrower’s gross income.
2. Removing negative CCRIS / CTOS records by settling overdue loans
A poor repayment history of your loan or any loan guaranteed by you will result in a negative credit record. If this happens, it is highly unlikely that a bank will approve your home loan, car loan or credit card application.
In this case, it makes sense to apply for a koperasi loan and use the proceeds to settle any overdue debts. This will get rid of your negative CCRIS / CTOS records and provide the financial flexibility that you need. Of course, ideally it is always better to stay disciplined and pay off all your commitments and loans on time to maintain a good credit record.
3. Consolidate credit card debts with low interest koperasi loan
Even with a good credit history, a koperasi loan might benefit you in terms of reducing your debt burden. If you have any outstanding credit card debts with an interest of 15% to 18% per annum or a personal loan with a high interest rate, you can consider using a lower interest rate koperasi loan to consolidate debt and pay off these expensive debts.
For example, Coop Bank Pertama offers up to 10 years of loan tenure with an interest rate of only 2.85% per annum. Before you apply for a personal loan, consider the option of a Koperasi Loan for its benefits of a lower interest rate, easier approval process and flexibility to clear CCRIS/CTOS negative record.
Some tips from Direct Lending: Spend time to research the details of a financial product by considering the interest rates and loan tenure. Take into account your personal financial situation as well. Always remember, a legitimate lender will never ask you to pay anything before you receive the loan. If there are any fees, insurance, stamp duty required for the loan, these fees will always be deducted from your loan amount before disbursement instead of being paid by you directly.
This article is prepared by Direct Lending, an online personal lending platform which offers bank & koperasi personal loans, especially for the civil servant. We help can help you to find, compare and apply financing that most suit your financial needs.