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Personal loans can be useful to supplement our needs, whether it is to finance a small home business or to buy specific high-priced products at a given time. However, a crucial consideration to make before taking out the loan, in my opinion, is the cost of borrowing the money.
Touch ‘n’Go introduced GOpinjam on April 1, 2022, a digital micro-lending feature available to users through the Touch ‘n Go eWallet (TNG e-wallet) app. It allows you to apply for personal loans ranging in amount from RM100 to RM10,000, but note that the e-wallet may provide you with a different loan offer depending on your loan amount, seniority and age. solvency.
Working with CIMB Bank through its e-Zi Tunai personal loan service, the TNG feature has been approved and is regulated by Malaysia’s central bank, Bank Negara Malaysia.
You have to choose a repayment plan between one week and 12 months. According to their terms and conditions, there will be no hidden fees or charges if you opt for early settlement.
With their high approval rates, applying to GOpinjam shouldn’t be that hard. To apply, you must provide basic personal information as well as your most recent proof of income (either your EPF statement or a one-month payslip).
To keep customers coming back, TNG offers instant approval on the app, which benefits users by avoiding having to go through the submission process again. But I believe it depends on whether the client is a good payer and has no previous loan defaults.
Upon approval, funds will be released to the user’s e-wallet account, which can be used to pay merchants directly or transferred to a bank account through DuitNow.
How would that be useful?
Short answer: when you need money immediately.
Long answer: For example, if you find yourself in an emergency situation where having cash would be beneficial, the GOpinjam credit facility allows you to get cash without having to go through a lengthy loan assessment process. credit. This process can take up to two weeks, depending on the bank. On average, most banks will process your request within a few business days.
As a last resort, some people may borrow money from unapproved lenders known as oh envy or loan sharks. We all know this is never a good idea as they charge notoriously high interest rates, and according to some, maybe up to 40% of your loan. If you don’t repay, they may use physical force and threats.
However, TNG aims to help those who don’t have good credit scores or simply don’t meet minimum wage requirements to qualify for a personal loan from traditional banks.
“The element of financial inclusion has always been at the forefront of our thinking, and we expect GOpinjam to be available to those who otherwise would not have been able to access formal credit facilities,” said Effendy Sharul Hamid, CEO of Touch ‘n Go Group.
Apart from that, another advantage of GOpinjam is that you can borrow small amounts starting from RM100. Nevertheless, it would not be advisable to do it for such a small sum, if you can find other ways to get it.
The cost of borrowing
The new TNG digital loan offers an annual interest rate of between 8% and 36% per annum (pa). According to the team, the 36% per year concerns loans less than three months old. This may be considered quite high by some and has come under public scrutiny, but BNM has released a statement that there are “safeguards in place”.
To give you a comparison, here is a summary of the interest rates of various credit facilities.
An overview of variable interest rates
|Credit facilities||Interest rate (pa)||Minimum wage requirements|
|TNG GOpinjam||8% – 36%||RM800|
|Credit card||15%||From RM2,000|
|Personal loans (Banks)||3.99%-9.99%||From RM1,500|
|Cash payments (credit cards)||From 6.88%||For cardholders|
To be as accurate as possible, only banks with loans up to RM10,000 and a maximum tenor of 12 months are compared.
At the time of writing, Alliance Bank offers the lowest interest rate on personal loans in the market, charging 3.99% of the total amount per year (depending on the loan amount and the duration of the plan reimbursement).
Even so, the minimum monthly salary required to apply for the above product is RM3,000, which makes it inaccessible to low-income earners.
Interest rates set by banks also vary depending on various factors. This includes loan tenure (how long it takes to pay off the loan), credit scores, loan size, and debt service ratios (how much you owe versus what you earn).
Personally, I think Aeon Credit provides a competitive service by offering personal loans with a minimum monthly salary requirement of RM1,500, which is considered a low entry point compared to other personal loan offerings. banks.
The interest rate starts at 0.66% per month, or 7.92% per year. Additionally, Aeon Credit has a simple approval process that you can take advantage of if you have a bad credit history or haven’t established credit yet.
Compared to credit cards
GOpinjam rates are significantly lower than credit card rates. If you have credit card debt, be aware that interest is compounded daily. This means that your card issuer will charge you daily interest on your balance, which will continue to grow a little faster day by day.
Although credit cards may seem expensive, they are also well known for their cash installment options. Cardholders can get cash while paying at affordable monthly rates.
I received a call a few days ago from a Maybank telemarketer offering to liquidate up to 70% of my available credit limit through their EzyCash product. This implies that with a credit limit of RM12,000, I could choose to withdraw RM8,400 and repay it in monthly installments at an interest rate of 8.88% per annum (pa). It gives me convenience by eliminating the need to apply for a separate loan.
Most credit cards now offer Simplified Payment Plans (EPP) for large purchases such as cell phones, laptops, washing machines, etc. These plans usually have a 0% interest rate and can extend for up to 36 months. Thus, the cost of borrowing money is close to nothing.
It carries risks
Since TNG’s target market is low-income people, some may argue that this is a dangerously short-term solution with potentially long-term consequences.
If you miss a payment or default on your loan, you run the risk of being blacklisted and negatively impacting your credit reports. This means that you will almost certainly not be able to apply for new credit facilities in the future, such as car or home loans.
Another risk is that individuals will have to repay more than they can afford. If you applied for a RM10,000 loan on GOpinjam, you would pay RM1,445 in interest per year, excluding minor fees. This can be a very high cost of borrowing and is something you should avoid if you think you won’t be able to repay the loan in full.
Another similar credit facility you should consider is BigPay’s new digital loan. It has similar features and a lower interest rate of 8% per annum, although its loan offers and term differ a bit.
There certainly seems to be a strong demand for such services, judging by all the recent launches of buy-it-now, pay-later and micro-loan offerings. Additionally, there is also the current ETH special withdrawal of up to RM10,000, which we have seen many Malaysians receptive to.
Whether it’s withdrawing RM10,000 from ETH or taking out a micro loan under specific circumstances, there are ways to be smart about it, as Malaysian financial bloggers have shared here.
Whichever option you prefer, keep in mind that getting into debt takes a lot of thought and calculation.
In difficult times, you should only think about taking out a personal loan when absolutely necessary, for critical and urgent things that only you can justify on your own.
To determine if GOpinjam is right for you, you should also consider your financial situation. Do you earn a constant income? Have you considered additional monthly expenses?
The bottom line is that while we have discussed the pros and cons of adopting GOpinjam, the decision to apply should not be made in haste. Take the time to carefully weigh all your options and assess the risks that come with them.
- Learn more about Touch ‘n Go’s GOpinjam here.
- Read more finance-related articles we’ve covered here.