5 Personal Loan Myths that You Should Know - Direct Lending Malaysia

5 Personal Loan Myths that You Should Know

Personal loans are often related to various unpleasant issues among Malaysians. The concept of personal loan is often misconstrued by some parties who have failed in their financial management. As a result, personal loans are blamed as the main cause of their financial failure while in reality, this actually stems from an individual’s failure in planning their finances and managing their debt commitments properly. The following are 5 personal loan myths that you should know!

Myth 1: Personal loans are bad debt

Source: Freepik

Personal loans are often regarded as bad debts by some people. Personal loan can only become a bad debt when an individual fails to manage their finances properly. Most personal loans are misused by the borrowers themselves and the lack of proper financial management results in their failure in servicing their monthly instalment commitments well. Read here for the difference between good debt vs. bad debt.

To overcome this, try to obtain financial advice from reliable parties to perform checks on your qualification. Qualification check is very important to determine the amount of monthly installment commitments that you can afford to pay.

Myth 2: Personal loans have a high interest rate

Source: von.gov

Every loan, regardless of personal loans, property financing and others have varied interest rates according to the respective bank’s policy. Usually, interest rates offered are reasonable, but the failure and the lateness of the borrowers in servicing their monthly installments in the set duration cause them to be penalized in the form of fines and penalties as agreed in the loan document. When this happens, the amount required to be paid increases because of the accumulation of fines, which leads borrowers to believe that the interest rates charged are high.

To prevent this situation from happening, try to get confirmation from the officer-in-charge on the loan’s interest rate and the penalties that will be imposed (if applicable). Do not forget to compare the interest rates offered by various banks and understand their terms and conditions. With the correct understanding of the terms and conditions of the loan obtained, you will not only be able to avoid confusion but also be able to choose the best loan plan for yourself.

Myth 3: Personal loans can damage your credit score

Source: Freepik

Yes, personal loans can indeed damage your credit score, if you fail to service your monthly installments within the stipulated period. Your credit scores can deteriorate not just because of personal loans, but also any type of loan if you pay your monthly installments late including your phone bill. Try to understand in detail on the meaning of credit score, CCRIS and CTOS. In the event you have a negative credit record, read our article on 7 ways to clear your negative CCRIS record.

In certain situations, personal loans obtained can act as an advantage for the next loan. As an example, good CTOS and CCRIS records will ease the approval of housing loans because the banks are already convinced with your commitment in servicing your monthly installments properly.

Myth 4: Personal loans are only approved easily if I am a civil servant

Source: modernsurvivalblog

In order to qualify for the loan, documents that portray your income and commitment in servicing your monthly installments play an important part compared to your occupation sector. If you meet the requirements and maintain a good credit score, it does not matter whether you are a civil servant or a staff in the private sector- you have an equal chance in loan approval. Your preparation of complete and legitimate loan documents is crucial in smoothing out the process of loan application so that it becomes quicker and much more efficient.  Therefore, please ensure that you provide documents that can prove that you earn a steady income (such as pay slips, latest EPF statements or Tax Verification Form) to the loan provider when applying for a loan.

Myth 5: You can only receive a loan from “Ah-long” or you will have to make an upfront payment to get a loan, if you can’t get a loan from a bank

Act Now Scam
Source: Answer First

Before obtaining any loan, you need to investigate the background of the agent who is offering loan services. You can read news reports on loan scams by unauthorized lending agency. Many borrowers make a mistake by choosing unlicensed agents because they are fooled by quick loan approval, up to the extent of loan approval in only 1 hour or very easy loan approval process.

As a borrower, you should always be wary about the services provided by some unscrupulous parties and carefully examine their background. At the very least, all legal loans will not require the borrower to pay any upfront fees before receiving a loan. Read our blog to identify loans that have elements of fraud.  Loan platform like Direct Lending is established to assist borrower to search and apply loan with ease and safely.  Importantly, the service is 100% free.


Most of us may have the wrong concept on personal loans. Personal loans can be a significant help during rainy days, with the condition that as the borrower, you understand and are clear on the purpose of the loan applied and are disciplined in performing your commitment to the lenders. Do not blame other parties, if the borrowers themselves fail to manage their finances properly.

Should you require financial advice or wish to obtain a safe personal loan, check out Direct Lending’s website. Direct Lending is an online personal loan platform that assists civil servants (cooperative loan) and also private sector employees to check and obtain a suitable loan quickly, easily and safely. Our services are 100% free.

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