I received a query on debt settlement.

Hi, Mr Lau,

First of all, many thanks to you for giving me the free e-book.
Its’ worth reading, cause I’m aware of unit trust investment now.
As introductory, I’m female, age 33, working in a factory.
I’m in debt, honestly. I’m in debt of personal loan, housing loan, credit card loan.
However I’m also having passive income, if that’s correct to describe my monthly income from 3 acre land of kelapa sawit.
But honestly I’m not a decision maker in financing.
Would you please advise me on below problem;

Debt 1;Personal loan with bank rakyat; balance is total RM 35K. mthly is about 568(a bit for get). for another 62mths. Rates 5.75%.
If settle now need to pay RM 28K.

Debt 2; housing loan, balance is 12 years, mthly is RM 850, rates(forgot).
I’m planning on refinancing my housing loan, which is 71K (plus insurance), for 15 years (rates; 1st ~ 3 yrs: 4.9%, 4th yrs onwards : 5.01 %), mthly will be RM 565.

When I read your ebook, I’m thinking of add another 28K to that amount. So that I can settle the personal loan.
So after discuss the bank officer told me, for 28K, for 15 years, mthly repayment is RM 222.

My intention is to reduce the MRI, monthly repayment installment.
So instead of paying 1418 ;housing & personal
Pay only 787.

But problem is, if the personal loan plus interest total if included in refinancing will be RM 40K. SO I feel confused now. Which way to move on?

Undeniably, mortgage loan is the cheapest loan available nowadays. Bankers feel secured because your house will likely appreciate in value over time. I agree that it is a wise move to consolidate your personal loan and mortgage. So that the end result is paying only the mortgage of roughly RM99k. Then you will reduce your monthly installment thus providing you more surplus.

However, you mentioned that the total interest will be RM40k, which is true. Refer this file for an estimation of the mortgage amortization table.

Amortization tabel -rm99k mortgage.pdf

Please don’t be confused by the TOTAL interest you will have to pay. In fact, the money will be in “lesser value” relatively, because RM100 now is worth a lot more than RM100 15 years later. That’s the future value of money. If you discount every ringgit you pay down the road, it is not as high as RM40k you might perceive.

The right perception is to think of the money’s worth in today value. The easiest way to compare is the Internal Rate of Return (IRR). Sorry that I don’t want to confuse you with this jargon. In layman terms, just compare the effective annual rate (EAR) of return on where you put the money now. Since the personal loan interest is 5.75%, it is better to consolidate it in your mortgage refinancing which is 4.9%.

Whoops...  collateral damage
Creative Commons License photo credit: SqueakyMarmot

In order to provide a case study, further information needed for the analysis:

1. How much is your house worth now?
the value is about RM140K.(its SEMI-D (SINGLE STOREY))

2. Can you check through your document to find the mortgage interest rate?
3.99 %(1st year) + 6.80%/ANNUM(2001) , I read thru docs, mentioned that we have ceiling of 9%,(eon bank)

You really should refinance your mortgage. You will be able to save 1.9% interest charges.

3. You mentioned about credit card debt. Can give more details?
I have hongleong master card, I did balance transfer fr hsbc visa & master, at total amount of RM3000. So I’ve committed to pay RM270/mth in order to keep the special rate which is 6.99% within 1 year. Plus I took coc which is cash online credit after that, at amount of RM2900, so I can pay the legal fee for refinancing & get the lowest rates(if non free moving cost, they offer only blr-1.4, if free,the rates is blr-1.7. So I commit for 3 years, mthly I have to pay RM104.

If you are taking the COC for the purpose of getting a better rate on your refinancing, that’ll be not wise at all. The extra 0.3% for zero moving cost (ZMC) refinancing package, based on RM99k loan is only RM297 saved on the first year. The amount you will save on interest charges will get less year after year. How long do you think you can recoup the RM2900 for the legal fees? 8-10 years? Plus all the interest you paid for COC? You should have taken the Zero Moving Cost Package which charges slightly higher interest rate of BLR-1.4.

Moreover, is there any penalty to settle your HL master card debt? If not, why not take additional RM3k via your mortgage to settle it. The interest rate of 6.99% is 2.09% higher than your new mortgage of 4.9%

4. Do you have any other assets beside the mentioned land? such as life insurance policy, or other form of investment?

I have maybank life insurance, which I pay RM112 for 16 years & it will be end in 2015, the sum is RM15K plus bonus.

I also have tabung haji. Monthly I deduct RM 220 fr my salary.

I.m sorry ,but I have another question. Since the factory which I’m working have grouping insurance fr great eastern,I’m thinking about taking the money fr maybank life insurance to invest in unit trust. If surrender now, I can get 9000. Is it worth doing that?

Please don’t surrender your policy. It is dumb to do so because you are half wet. Use your saving to invest in unit trust. Don’t use your insurance money.
Since you had paid the premium for this Maybank policy for 9 years, it is really worth to continue paying the premium. Now every sen you pay is 100% used for your policy cash value that will generate more bonus.

After you refinance, you will have a better cash flow. Manage your cash flow wisely and do budgeting and frequent monitoring. You shall continue with your tabung haji too.

Overall opinion:
1. Consolidate all your debts (credit card, mortgage, and personal loan) into only one mortgage. Your house value is RM140k and it is enough to finance all your debts.

2. After you consolidate the debt, you will have a better cash flow and surplus. Save regularly. Meanwhile, learn about how to properly invest your savings.

Do you have any advice for this particular case? Please share in the comment.

If you need help on personal finance, use our forum.


Personal finance author and trainer

    101 replies to "Case Study: Consolidating Personal Loan, Mortgage and Credit Card Debt"

    • Dr. SA


      I am a government officer planning to take optional retirement in 2 years to start up a business. I earn RM9k per month, no EPF, currently the sole household breadwinner and have the following monthly commitments
      – Mortage on a condominium (government loan) RM940 p.m., outstanding balance ~110k. Current value RM450k, leasehold. We currently live here
      – Car loan (140k) RM1600 p.m, tenure 9 yrs, already paid 5 yrs
      – Car loan (60k) RM790 p.m, tenure 9 years, already pain 2 yrs
      – Insurances RM800 p.m
      – Education loan RM200 p.m.
      – Credit cards which I pay 2-3k p.m. Current balance around 5k. I use my credit cards to keep track on my petrol, car maintenance & grocery expenses

      Recently my husband sold his property and we made about RM200k profit which I save in ASB. We actually plan to get a bigger landed property since we have 4 kids.
      The question is, should I
      1. Pay off all the outstanding loans with our savings now or wait for gratuity payment when I retire (estimated at 200k)
      2. Use the savings for our new house down payment and make do with the balance for my new business venture
      3. Sell our current property? I’m quite reluctant as the location is very strategic and can easily rent out at 1.5-1.8k p.m.
      4. Do nothing and wait until the time comes. I will only receive my monthly pension 11 years after optional retirement

      Your expert advise is highly appreciated

      • KCLau

        Hi Dr. SA,

        It is advisable to get financial planning advise from licensed financial planner. Well, I am not one and I couldn’t and shouldn’t plan your finances.
        Nonetheless, here are my opinions:
        – ASB is giving better return than the mortgage interest. I would rather park my money in ASB ( of course, I am not qualified to do so as a non-bumiputra).
        – Committing to a bigger and more expensive property come with all other higher expenses too. Are you comfortable with that? To be safe, keep the mortgage commitment for own-stay property at 10-20% of your income, to leave more savings for investment.
        – You don’t need to sell your property to cash out the equity. An alternative is to refinance it with higher loan amount.

        As a conclusion, to grow your wealth faster, you put your money to work harder – getting higher return than the interest you pay the banks.

    • iz

      or do you have any bank that can offer the debt consolidation with refinance home?

      thank you.

      • KCLau

        I understand that AIA provides mortgage and they can help to consolidate your other loans when calculating DSR.

    • iz

      Hi KCLau,

      Need you opinion on my case;

      I would like to refinance my house (under my name-gift from grandfather) to pay my debt in akpk. I am planning to refinance at 260K-value of house, from my understanding..I will get about 80-90% only, and the bank will settle my loan with akpk, the rest of my money, i need to settle my husband akpk too so that he can buy other house for his mother since he already promise to buy the house with the landlord about 2 years ago (currently his mother rent the house). We stuck in this debt because to help my husband business with his long friends, but end up we suffer to settle the debt and choose to go to akpk after we cannot support all the debt. Since he already promise to the landlord, i think this is the best way to settle our debt to akpk so that he can buy house for his mom – (at least we have debt with something that we can have in future rather than pay debt without nothing). we do go to some of the bank, but not all the bank can serve us since we are under akpk. Do you have other way for us to settle our issue? thank you.

      • KCLau

        When someone is with AKPK, they need to complete the repayment first before they can get any new loan.

    • Alvin

      Hi Lau,

      I am facing some financial issues whereby my debt amounting to RM 150,000.00 from personal loans (from several banks) and few credit cards. I am looking to consolidate all my debts (personal loans and credit cards) into one bank.

      My salary is around RM 7,500.00 and am willing to make monthly repayment up to RM 3,500.00 for 5 years tenure to settle this debt.

      Is this possible? Will there be any bank that will consolidate this debt into one?

      • KCLau

        Hi Alvin, I am afraid it is very hard to get loan in your case. There is no harm trying though. Consider AKPK – they can help you lower the interest charge and you can consolidate all loan through their program. Their service is free.

    • Son

      Hi Lau,

      I am facing some challenges now and I need to seek for your advice. I currently have 4 credit cards (two each from two banks) and I am owing them quite a bit. The breakdown as follows :-

      1. 5,000
      2. 1,500
      3. 25,000 – 20,000 as personal loan
      4. 4,500

      And to make matters more challenging, my new property has just completed and I will be taking the keys soon. My intention is to sell this property as I am not able to pay for its installments and to add salt onto my wound, I will only be making very little money or no money from this sales because my purchase price was very high. I have to bear at least a couple of months’ installments (a bit more than 3k monthly) starting next month until I manage to sell it off.

      I am only able to set aside about 3,000 monthly to pay for the credit card debts and the mortgage installments.

      What can I do to get myself out of this dilemma?

      Hope to hear from you asap. Thanks.

    • […] tempoh bayaran menjadi lebih panjang. Baca kajian kes tentang “debt consolidation” oleh KC Lau. 4) Hanya 2 pilihan – tambah pendapatan atau kawal perbelanjaan Kita perlu berpijak dibumi […]

    • […] tempoh bayaran menjadi lebih panjang. Baca kajian kes tentang “debt consolidation” oleh KC Lau. 4) Hanya 2 pilihan – tambah pendapatan atau kawal perbelanjaan Kita perlu berpijak dibumi […]

    • vish

      HI Klau,

      Good day to you,

      I need some idea from you. I bought a house worth 320k now it is rm480k. But I have all lots of debts about 120k only on personal loan and cc. So I planned to sell my house and settle all the debts. So my question is, after I settle my debts will I get housing in another 6 months time from any bank. that would help me for my future. hope to see your reply soon.


      • KCLau

        Hi Vish,

        This very much depends on the banks’ policy/underwriting. Every bank has their own criteria. So if you are already debt free and being a good paymaster, there is a high chance that your future loan will be approved.

    • Fel

      Dear KC Lau,
      I need some advice, I like to re-mortgage my house to settle my CC debt amt up to 30K, it is advisable to re-mortgage with current housing load banker AMBANK or shld I change the banker ? In 2009 they have revised my BLR-2.2% with another log in period of 5 years. Should I shop for other bankers re-mortgage benefit ?

      Thanks for the advise.

      • KCLau

        Hi Fel,

        It very much depends on which bank can give you the best rate?
        Negotiate with your existing bank and then seek other banks’ offer. Compare them and go with the best one.

    • Ng

      Hi, need advise to settle credit card debt. If let say CC debt is RM20k, adviseable to covert it to term loan or apply personal loan to settle it? I view opinion from difference source but both have it pros and cons also.

    • AskChong

      Beware of loan shark, even sometime it is look like the only solution.

    • John Kumar krishnan

      Hi everyone,

      If you need to pay off your credit cards faster and at a cheaper, I have the solution. Get to me…don’t wait till you get blacklisted or you dig in deep into your hard earned money in yr savings accounts.

    • AskChong

      Hi AF,

      No way you can get the loan documentation done within one month or less. The process is lengthy.

      How urgent is urgent?

      • AF

        Hi Chong,
        Less than a month. Any advise? I got no more fund now but I need to pay off the manufacturer so that they can release the goods and I can finish off the job. Delay longer, my losses more.
        Went to HSBC today but to no avail because our BNM change loan regulation this year. Whatever business loan, personal loan.. all no need to discuss because I do not have income tax now. Company new, 6 month old.
        Hope someone can enlighten me.

        • KCLau

          Hi AF,
          So sorry to hear that you are in a desperate position.
          Maybe you can think of other way instead of having to get the extra money. Try negotiating with the manufacturer to see if they can give you some short term on the goods.
          Wish you the best of luck.

          • AF

            Thanks KCLau,
            But that’s the first thing I did before, been telling them that I do not have enough money to buy off the stock and need to finish the job here so that I can collect payment from customer and pay them.
            Initially they agreed but now they(the supplier) said that they also in need of cash.. bla bla bla… which I think is their trick.
            I even end up telling the supplier to come to Malaysia and see everything themselves to ensure I am genuine in everything. But as you know, it’s hard nowadays to gain personal trust in business dealing unless we deal for years.

    • AF

      Hi KC,
      I urgently need your advise here.
      I’m doing my own business, sole proprietor. New company, 6 months old.
      But my first 2 business deal, I already making loss. Now I need around 80k to turnover so that I can minimize my losses. My parent willing to refinance our house valued around 100k( house paid off few years ago). Problem now are, refinancing takes around 3-4 weeks and I can’t wait that long.
      My option now is, can I change my company from sole proprietor to partnership and add my parent name into it? Then use the house as collateral to get some business loan or OD for the company(fyi, the house still my parent name)
      Also, it take more than a month to transfer house ownership from my parent to my name.
      Please advise me what can be done as I need to money urgently but only has a house as collateral which is under my parent name.My parent cannot take personal current account and use the house as collateral for OD as they do not have any job( no repayment ability) thus the bank not willing to give them any OD.
      Hope to get your reply asap and let me know if i described the problem not clearly as it is quite complicated for me also to explain.

      • AF

        anyone mind to advise on comment above? Urgently need to know how.

    • Samk

      Hi Mr Low, I need an advise, I own a house which value at 140k, I bought the house for 100k, I had serve the bank for 7 years tenure, my total settlement should be around 65k, I wanted to refinance the house for 140k, cos I badly need some cash to settle my credit card debts, mounted up to 30k and my name are blacklisted due to credit card pyt due… I just wanted to know is it possible to refinance the house? Since my name are blacklisted.

    • Jue Abdullah

      Hi KCLau,

      My spouse and I took a joint government house loan for our house. Can we get refinance the house using commercial bank loan?

    • bagakshi

      woow, so many experts commenting here…..
      if one don know how finance & banking credit evaluation work. no matter how good suggestion is, if u don’t know what criteria banker is evaluating on u, u will always on try n Fail!! those with good criteria will get PASS by banker ! those already “sh*” in criteria will always get “sh*” back from ban….kkk. B…careful with ad….wise

    • AskChong


      Not surprise that you are unable to get another credit card for balance transfer as well as personal loan.

      Please check carefully why your ASB units are locked with the loan for 20 years, may be u hv overlook redemption clause. ASB loan RM17k, how much is the units worth? If different is significant, try to redeem the loan.

      Personal loan on flat rate basis is second expensive (after loan shark or credit card) while mortgage always the cheapest (except loan from relative/parents)

      Sorry to say that without insurance coverage, with debts, you are highly exposed to risk. Hope you may be some coverage once your debt consolidation is done.

      Back to the solution, looks like you have no better option other than to refinance it, if look-in period is end of this year, it is really a waste to incur the RM10k+ penalty (penalty on balance or loan facility?)

      Do you have a car free from loan?

    • AskChong

      My opinion:
      1. Personal loan for government servant is never cheap (if compared to house loan)!
      2. Cost of refinancing – have you include the legal fee+stamp duty? May cost you more…. even if you consider to take up an ZEC package, interest will be much higher in long term.
      3. Property is freehold or leasehold? refinancing may take months…. how many month to the end of lock-in period?
      4. Read carefully, lock in period end 5 years from date of first disbursement or full disbursement?
      5. If you are in desperate condition for cash, refinancing may take months too.
      6. Get a low amount of personal loan to meet the immediate needs (even at higher cost)
      7. To consider to sell all ASB units to settle credit card
      8. Any insurance policy with cash value? can get a policy loan at 7% p.a. only, no legal fee.
      9. Can get NEW credit card for balance transfer @ 1% p.a. for 12 months? May ease your cash flow.

      Many more options…. try to explore before refinance NOW.

      • Eddie

        Hi Chong,

        1) Agreed. That’s why i’m looking at house loan as interest is cheaper. Hopefully, with the right investment from the additional cash, i may able to dump more to the housing loan thus reducing the loan amount.

        2) Yes, I’m planning to take ZEC. Interest is slightly higher in long term.

        3) Freehold. Need to recheck the lock-in period but i think it should be by end of this year.

        4) Ok. will recheck.

        5) Agreed. But i’ve tried balance transfer and still cannot pay the min. payment. Tried personal loan but got rejected.

        6) Al-Rajhi has a personal loan rate at 7.5% flat. That translates to 15% effective rate. Still quite high isn’t it?

        7) ASB units are locked until i’ve settled the ASB loan (20 years tenure). With the additional cash from refinancing, i plan to settle the ASB loan amount too.

        8) No insurance policy. Stopped paying as i couldn’t commit to the monthly payment.

        9) Don’t think banks wanna gimme a card now with 5 cards and RM50K outstanding balance.

        Guess what i need is additional cash right now to settle my cards, ASB loan, save some for investment and business. That’s the main reason why i’m thinking of refinancing.

        Please advice whether i’m still at the losing end after my rationale for refinancing and considering all other options available. Thanks!

    • ronmahsih

      Hi Eddie,
      Are you a gov servant? Personal loan for gov servants are quite low now.
      BSN just announced an even cheaper personal loan. Check the site.

      Some banks have additional financing for home loans more than 6 months. I know Maybank does. You may check with your current bank.

      FYI, ASB div is only 7.5%. The rest is bonus which is based on average monthly balance for the past 20 yrs.

      • Eddie

        Hi ronmahsih,

        I’m not a govt servant, but i noe the loans are quite low. Tried an islamic bank before for personal loan but got rejected.

        Yup, my ASB rate earlier was just an estimation.

    • AskChong

      Hi Eddie,
      Ronmahsih is right, go for balance transfer “if you can”. Staff loan 3.5% is very good, I assume you are staff to a bank, can you get top up loan instead of refinancing?

      if you invest in unit trust, don’t count on the return (which may be up and down)
      if you invest in ASB with almost guaranteed 8%p.a. why not (are you sure 8%??)

      If you can give me all information, may do a simulation on cash flow.

      • Eddie

        Hi Chong,

        Perhaps i can explore top=up loan, but i think its only for house reno, will check.

        Yup, ASB dividends has been hovering around 8%-9% per annum for the last couple of years.

        Thanks for your keen interest to assist me with my financial problems. What info do you require please?

    • ronmahsih

      Happy New Year to you too, Eddie.

      1. How long more is you lock-in period? How do you come up to ~10K penalty? It could be more.
      I wouldn’t recommend refinance it now since your current int rate is very low, unless you can get the same rate.
      2. For credit card (CC), the fastest solution is balance transfer. Check for latest offers from ALL banks website. If you have balance in your ASB, use it to settle your CC first. By all means, pay in full every month.
      3. Unless you are a very savvy investor, I don’t know of a very stable investment. Still, do look around.

      • Eddie

        Hi ronmansih,

        Many thanks for your reply. The lock-in period should last till next year (5th year). The penalty is 3% of the outstanding loan amount (about RM334K). I’ve tried balance transfer before but i continue to default the min. payment as i’m running outta cash to survive (if i convert it to term loan, the int will be around 9-10% flat, which is still higher than my refinancing int). With RM50K credit card bills outstanding, i need some cash injections, hence the refinancing came to mind.

        Hopefully, by settling my card bills and investing in stable financial products, i may able to make this move viable. I also plan to start off a business from the cash balance.

    • AskChong

      Hi Eddie,
      Wish you a happy new year!

      Are you a savvy investor? To borrow extra from refinancing for investment may be viable if you are a savvy investor. Else, look into REIT for stable return which generally around 7% to 8% when your borrowing cost around 4.5% to 5.0% (assume BLR goes further up in year 2011, which is highly possible).

      Lastly, I don’t think your assumption is correct for the amount to be refinanced. Please seek for consultation.

      Have you explore alternative to settle card debt and ASB loan (by the way, what is the interest rate for ASB loan?) – paying penalty of ~RM10k is painful.

      Refinancing typically take around at least 2 months as it involve discharge and charge of document and also request for redemption. A good lawyer may speed it up for you.

      • Eddie

        Hi Chong,

        Many thanks for your reply. I’m looking at investing in ASB (avg 8% div) and islamic unit trust (avg.8%-10%). My current ASB loan interest is currently at 5%. For the refinancing, i’m planning to borrow the loan amount according to current market value of the house, hence the higher instalment. My credit card bills are way high right now and as i’m currently paying minimum payment and at 18% interest p.a, its a losing battle for me. I don’t mind the penalty payment if i can get additional cash right now (time value of money) and settle all my outstanding bills.

        What do you think bro?

    • Eddie

      Hi KCLau/ronmahsih,

      I’m planning to refinance my house (outstanding loan amount rm334K at 3.5% interest rate – staff loan) to an islamic housing loan (rm620K current market value, int at BFR-2.15%, ZMC). This will result in higher installment from RM2K to around RM2.7K and longer tenure from 23 years to 25 years. The reason for doing this is to settle my credit card bills ( 4 cards at RM50K and ASB loan at RM17K). I might also have to pay for the penalty of 3% lock-in period (est RM10K). After settling my debts, i plan to use the cash balance (est at RM100-RM150K) for investments.

      My questions are:

      1) Is this the right decision that i’m undertaking?
      2) What is the avg. processing time for a home loan?
      3) What are the best financial investment products with secured and stable returns?

      Thanks a lot guys and Happy New Year!

    • John Kumar

      Is it possible to Turn Credit Card Debts into Term Loans in Malaysia? TY

    • John Kumar

      I did a balance transfer of RM2500 on credit card debt with OCBC to CIMB(direct access) and Im charged 1% for 12 months. There is no service charge imposed.

    • Winston

      i wonder what’s the best way to pay ptptn loan?I’m paying RM150-RM250 per month (if i have extra i would pay more). Next year i will start to pay RM1120 per month for housing loan, on top of it i’m paying RM210 per month for personal loan (balance RM4K) and i have 2 credit cards which i pay RM150 each per month (more than minimum payments)

      i save minimum RM100 for ASB and ASW2020, RM278 for HLA Cash Builder, RM1K (every 4th month from EPF) for a unit trust and Rm500 hard cash..what ever balance i have at the end of next month(just before new salary) will be save in another account(no ATM card).

      Am i on the right track?Now im thinking of getting Amanah Hartanah Bumiputera and bond

    • HM

      hi..i really got a big problem n really serious situation with my financing right now… my total pays per month is really over than my total salary…i really need a personal advice with every payment that i made that i could arrange by myself…i’m too shy to go to meet people n story about my financing..can u help me…

    • RL

      I’m currently having credit card debts of RM8k (reduced from RM12k beginning of this year), which I will be able to pay it off within half year. Besides, I’m paying my car, RM825/ month until end of next year.
      Can I check in my financial situation, is that possible for me to consider the house? I’m 27 years old with RM3500 monthly salary.
      Thanks in advance.


    • jeejee

      Hi KC,

      Can I proceed to apply for housing loan with below condition? It is possible to get approve on my application?

      I’m still servicing personal loan (outstanding=~2k) and one credit card (outstanding=~7k) with good repayment history. My wife has one credit card (outstanding=1k).

      Total Income per month = 7K ++ min.

      Housing loan is around rm400000.

      Thanks for your advice in advanced.


    • charles

      Hi KCLau,

      I need your advice on consolidating my debts. Fyi, i have 2 personal loans amounting rm 48k with the interest of 5.85% p.a for 15 yrs @ rm501 mthly and rm17k with 8% p.a for 5 yrs @ rm294 mthly each and a credit card debt of rm 3k.

      Recently i have made an inqury with a bank officer at RHB where i did my mortgage loan and she told me that i would be penalized for 3% of rm206k mortgage loan and the legal fees will be borne by me . As im still in the lock in period, i would like to know if it’s worth to consolidate my loans by repricing / refinancing?

      Hope to receive your advice soon.


      • Chong Kong Hui

        @Charles – I suggest you to look for extra income first. (I am looking people who want to make a better living by making extra income)

        Without analysis with Excel, quite clear it is not worthwhile to refinance it within lock-in period, further, please clarify if the personal loan can be redeem in full without condition.

        Fee-based financial planning service @ http://chongkonghui.blogspot.com
        Contact me @ chong@chongkonghui.com

    • Gia

      Hi KC Lau,

      I’m having credit card with 3 banks,2 personal loan & housing loan.I just want to pay off my debt & do not want to use any of the card.I just took my housing loan a year back,can I do the refinancing to get fund to pay off my other debts?Please kindly assist me Sir.My unsecured loan is $30k & my housing loan is $150k

    • ronmahsih

      Hi azian,
      They should be mentioned separately.
      During the lock-in period, because of the very low interest rate, the bank is on the losing end. In order for them to recoup the losses in the event of early settlement/ refinance, they penalize you. That’s what the 3% is all about.
      There was a court case regarding early settlement.
      When a customer was trying to do early settlement, the bank asked him to pay in full per the agreement (in your case RM1.1m). You will say that this is unlawful because presumably the price of the property hasn’t go that much. Say, you want to do it after 7th year. Most probably the value will be around RM0.5m.
      Now, the bank is fighting based on the agreement since no no early settlement provision was mentioned in the agreement, which means that the bank valued the property at RM1.1m from the time you took the loan.
      Based strictly on the agreement, the bank is right.
      However, it is morally wrong and being ‘Islamic Loan’, it is also ethically wrong. But court rarely took into account the ‘moral’ and ‘ethic’ things.

      Hope this shed some light on understanding things.


    • azian

      Tq Mr Ron

      Just want to ask, is the early settlement/ refinance condition different with lock-up period condition? ok tqvm, i will surely ask them about early settlement provision!

    • ronmahsih

      Hi azian,
      Seems like the penalty during lock-in period is 3% of the loan.

      Buy-sell contract
      The bank bought the property from you at the price of RM335K. Then the bank sell it back to you at RM1.1m which must be paid within the contract period (20yrs? 25yrs?).
      Check with the bank, “what if I want to settle early?”. They should have some provision for this mentioned in the agreement.
      During the earlier years of Islamic banking, some banks didn’t put this condition in contract and the customer is typically the losing end. I believe this has been settled but it is still good to check anyway.


    • ronmahsih

      What is your plan regarding the house?
      If you want to stay there for the next 7 years, take the offer.
      What is the lock-in cost?
      Some banks have staggered lock-in cost as the years passed.
      The best is to negotiate the lock-in period. Say it to the bank that you’re willing to accept the BLR-2.2% but finding it hard with the lock-in period.
      Or ask for a FORMAL offer letter and ask around with it. Other banks could offer a better one.


      • azian

        Tq Mr KCLau and Mr Ron for you kind reply
        i’m planning to stay for a long time there since it’s 5min from my office.
        they not allow me to bring the LO document home, as it’s confidential but as i look at the offer it has staggered payment structure; which is around rm16k if before 5th yrs and 10k after 5th yrs. there is something 3% written there but i dont remember what it is ( maybe a penalty) i have ask for them to reduce the lock-up period but they cant revise it since their rate is considered very low.

        and may i know what is islamic buy-sell contract? since the buy price of my house is almost rm1.1mill conpare to my actual loan price which is rm335. is there any significant with that sell/buy price?

        thnk u for your expert advice.

    • azian

      hi Mr KCLAU

      i’m now considering to accept offer from affin bank for my housing loan. their rate is BLR -2.2% which is the chepest, at least for now. they also give ZMC. but their catch is the lock-up period is 7years starting from full disimbursmnt date. my dilemma is, since i’m a government servant, we have a flat 4% interest rate for housing loan. but i’m still in probation which mean i still cant apply for that scheme. i can apply after 2years from now.

      so should i take up the offer from affin? do u think the BLR will go up drastically. tq for your advice.

      • KCLau

        BLR-2.2% is a very good offer. If you can’t wait for the government loan, why not taking up the offer.
        But 7 years lock in period is quite a long time.

    • pinky

      Hi KCLAU,

      I’ve total 3 credit card debts around 15k! every month only manage to pay for minimum & sometimes some extra. but I didnt see the reducing in the amount :S
      I need to spend around 1.1-1.2k to pay credit card.
      Can I apply for personal loan to pay off all my credit cards debt? then I use 24mths to repay the personal loan at fix rate 12%. & 1 month only pay around RM700++.
      or do you think i should go for balance transfer?

      please advise.
      thank you

      • KCLau

        You can go for balance transfer and pay off the credit card as soon as possible.
        If you manage to pay off the debt shorter than 2 years, I think less interest is charged compared to personal loan.

        I think you may find that personal is cheaper because the monthly payment is only RM700 but you have to pay credit card minimum 1k plus. Are you still spending money on those credit card? If yes, there is no different of getting the personal loan to settle your outstanding debt now. Because your cash flow may still be the same – RM700/m personal plus the payment for your current expenses on credit card may come up to RM1k plus still.

      • Chong Kong Hui

        Lau is correct. How is your progress? Mind to update us?

    • Calvin

      Hi KC,
      Your comments and advices are really really useful to me and open up a lot of my mind. I have a few things would like to ask you for advices. Thanks in advance!

      I have used my credit card and easi-credit to paid my undergraduate course fees, of cause with some other personal used. my total balance now is about RM75k. it is really huge for me to handle even though i have quite a good pay currently (at about RM8k monthly). Due to the need to support my family and parents, i only manage to pay the minimum payment of about RM3K. The interest is way to high and i realized i have made a very wrong decision to use my credit card to pay for my course fees 2 years ago and now it is eating me alive.

      I am thinking to collateral a property; a piece of land that is belong to my father to get a loan from bank to pay it off and also for investment in property in foreign country. However, the property is yet to be transferred to me so, is it possible for me to jointly collateral the property to get the loan from bank for the purpose i have just mentioned? Please advice what should I do to get at least the credit card thing settle. Thanks a lot!


      • KCLau

        It is wise to cover your credit card debt with a home loan or something similar because of the length of term and lower interest.
        Since the property is not yours, you will have to talk to your father about this. But I am not sure if you can joint name for the loan of a property that’s belonged to your father. This is easy to find out, just talk to a banker. They will know what to do.
        Wish you all the best!

      • Chong Kong Hui

        Consider using this service, it is free

    • ronmahsih

      Hi Joney,
      I cannot agree more with KC.
      You’ll be in MUCH deeper shit if you do that. (sorry for the ‘s’ word)
      Your salary alone should be enough to make you positive financially by year end.

      First thing to do is balance transfer your credit card balances. Dig all banks websites and grab the lowest cost.
      For your new house, the most basic ones are the lightings. Go for the basic ones (the long fluorescents). I know that you need to show off your new house to family and friends after you told them about the purchase but hold that first. Grilles are necessary only in certain parts of the house only. 30K to spend on a new house seems too big.
      Keep servicing your 30k personal loan.
      Start small with the business venture. Learn everything that you need to know about business before you actually commit yourself.
      Maybe KC could run a success story of a businessman for all of us to relate to.

    • raz

      Hi KCLau,

      I am an avid follower of your site and think that your advice are practical and real.
      I am planning to apply for a personal loan of 100K, i want to use this to pay up

      1) Personal loan of rm30k
      2) 2 credit cards of rm20k

      I want to use the extra rm50k to
      1) rm30k to spend on my new house e.g.- put on grille, lighting, kitchen cabinet and minor renovation
      2) the rm20k to venture in a new side business that i’m starting out with my husband.

      FYI my take home salary is around rm7K. I am currently paying rm2K on my credit cards and personal loan. Do you think it is wise to take up this personal loan?


      • KCLau

        Hi Joney,

        You are trying to get more loan for more consumption (your new house renovation). It is really not a wise move because you are going to go deeper in debt.
        But the situation is that you seem to need the extra 50k for the purpose of renovation and business capital funding. It is a tough call. If you have choice, it would be better not to fund your spending with personal loan because of the high interest.

    • ronmahsih

      To Maha,

      Lock-in period is the period that if you fully-paid the loan (through refinancing or selling off of property), you will need to pay a penalty. The period varies from bank to bank and there are banks that do not impose lock-in as well. Typically it is 3 to 5 years and the penalty can be as high as 5% of the loan.
      Based on your info, it seems that you’ll be free of lock-in by this year (for 2nd house).
      Yes, you can consolidate. It will still be made into 2 separate loans but since they’re being done together, banks will treat you differently. They will even stretch their procedures with terms like these.
      I did it 2 years ago with Affin. Take note that Affin (most banks included) never mention of loans beyond the age of 60 but since my 2 houses combined sum up to about 400k, they’re willing to give me until 65 since I am already in my 40s. It is good to stretch the year to make the payment lower. I don’t know of other banks but do ask around.
      Yes, please make sure that you ask for the return of the MRTA! Your MRTA covers the whole duration of loan. If you use just a portion of it, you MUST get your money back.
      Now, what to do with the money.
      1st, pay off the highest interest. To most people, this is credit card. For your info, I carry zero credit balance though my consumption rarely go below 1k every month. If you have installment direct from shops (Courts Mammoth etc), pay that first! These are the highest interest!
      Next, if you still have excess, invest it somewhere. Learn about investment and risks.
      You should be fine.

      • KCLau

        Thanks for sharing your valuable experience.

      • Maha

        To ronmahsih;

        Thanks a lot for giving me ideas on how to use the excess money. Actually I don’t have any credit cards and installments for purchases. I only buy things when I really need them and strictly in cash term. My husband does not like buying things in credit term. Thank you again for your advice. I really appreciate it.

        Not forgetting Mr. KCLau for giving a chance to everyone to contribute and share their experience and advice.

        Thank you.

    • ronmahsih

      To Mahalakshmi,

      Why 2 houses in the first place? Do you rent 1 and stay in 1?

      Yes, you may consolidate them. But you never mention the lock-in period, should check in your document/agreement. House 1 should be okay I suppose, house 2 should be free this year the latest.
      Tell the bank officer that you want to consolidate your loans, some banks even help you with other loans as well (credit cd etc even Courts Mammoth installment).
      They could tailor a loan for you.
      Since you have MRTA as well, once you consolidate your loans, make sure you get back the remains!

      • Maha

        To ronmahsih,

        Thanks a lot for your advice. The first house is for my mother in law since they were staying in rental house. But that one is in Perak and another one is in Jb (currently staying). I could not find any lock in period in my document (maybe I overlooked it). Both different banks. Is it possible to consolidate? Sorry for asking you again because I’m not that familiar with banking terms. Can I get the balance MRTA as you mentioned (the remains).
        Okay, another thing that I don’t know is whether I should pay the extra cash to settle any outstanding loan amount or just use it for investing… Which one is the best?

        Again, thanks a lot for guiding me..

    • Mahalakshmi

      Hi Mr. KCLau,

      I’m looking for your advice on refinancing and consolidating all my mortgage loans(2) and a personal loan.

      1) House#01 – Bought on 2001, loan amount – RM47000, loan term – 25 years, interest rate (in my MIL house). Repayment – RM430.

      2) House#02 – Bought on 2005, loan amount – RM87500, loan term – 25 years, interest rate and repayment :-
      Fixed 2.5% – RM393 (1 year)
      BLR+0.3% – RM581 (till full settlement) BLR rate is 6%. Reduced interest. (575)

      3) Mortgage Reducing Term Loan – RM32000 year 2007, loan term 25 years. Repayment – RM 200.

      Is it possible to consolidate them? Please advise me on the refinancing and what i supposed to do in order to get extra cash in hand. Is it ok to settle the MRTL first or use it to invest in unit trusts. We are planning to save some in unit trust for our retirement plan.

      Please advice.

    • ronmahsih

      To Jack.
      DO NOT go to personal loan to settle credit card balance!
      The interest rate is either the same or HIGHER than your credit card. Credit cards are mostly charged at 1.5% per month. Though there are personal loans that are advertised as 1% per month, these are simplified FLAT RATE! The real interest is way much higher!

      Most banks now offer 0.5% per month. If you want a slightly better peace of mind, go to Bank Islam. They don’t penalize you for late payment, of course with t & c.
      If you can do a quick payment within 9 months, standard chartered (4.99% pa) or citibank (3.99% pa).
      There are banks that charge 0% per month but you have to pay a flat fee. Affin (either 2, 4 or 5% depending on tenure) and OCBC (6.88% first month, 0% for 11 month).

      After you did the balance transfer, you either need to stop all your credit card (terminate!) or go to the lowest interest. Affin (9.99% pa) is the best. Bank Islam wont charge for late payment. All other banks are too standard. You don’t have to be Islam to go to Bank Islam.

      The thing is, 37K is a lot. You need to do something, bro!
      And paying about 2k just for the minimum also hurts.

    • jack

      Hi Mr. Lau,

      Currently I’m having a huge debts in credit cards. I’m having 4 cards and total up the debts is 37k. I every month paid the min. never late but it still not able to reduce it much. I’m out of my hand to keep paying this which I’m not effortable any more. I just only try to apply for personal loan thinking to settle it in 1 time and just repayment to 1 bank in 3yrs times. but unfortunetely the amount that the bank approve for me is only 21k instead of 37k.

      What I can do now ? by using this 21k I still need to pay for balance outstanding in credit debt how ? what I can do now ?

      Hope to get you reply on this soon…


    • jack

      Hi Mr. Lau,

      I’m having a huge debt in credit card. total i had 4 cards and total of all of this 4 I htuang 37k. every month i pay on time with minimum and now i have family and i’m not affort for the repayment now. I try for personal loan 1 time off to settle off this issue but the approve amount is only 21k instead of my total 37k.

      with the monthly repayment of the personal loan is 735/month for 3yrs. but with this condition I still cant settle all the debt in credit card.

      Need your advice on this how to solve this problem.

      • Alex

        Hi Mr. Lau,

        Need you advise as below:-

        Actually a same case as per above comment, I had total 3 credit cards and all credit cards is already reach the limit and I can’t afford to pay now.

        My salary is RM 3000.00

        1st card credit limit RM 15000 = Own RM 15000 now
        2nd card credit limit RM 4000 = Own RM 4000 now
        3rd card credit limit RM 5000 = Own RM 5000 now
        So total I owning now is RM 24000 just for the credit card.

        Others debt:-
        Car loan = RM 625 per month

        Normally I will settled the car loan first then only pay minimum payment for each card but now I already have a family. Hence, I really can’t afford to pay all the 3 cards.

        May I know any solution to solve the problem as I try to applied for personal loan to solve all the debt (credit cards) but the bank not approved due to I have many commitment. Hence, I am suffering on this.

        Thanks for your advise and help.

        • KCLau

          Try to call up the bank, and convert your outstanding to flexi payment. Stretch it longer and you’ll be able bring down the minimum payment, hopefully.
          Do you have other credit cards that still have credits left? If yes, you can do balance transfer to those cards.

    • Ronmahsih

      To Mr Ueno,

      If you hate the discipline of paying the loan, i would suggest you something else.
      Use your house ‘geran’ as a collateral (security) for the overdraft. I know that not many banks do it but the last time that I checked the websites, OCBC and CIMB do. I have personally checked with CIMB and they put the interest at BLR-1.65% on the used portion only.
      FYI, I don’t work in banking industry.
      Take note that per BNM regulation, overdraft over 250K will be charged another fee. You may ask for something lower.
      Good thing is, you may pay as and when you like, and how much you like.
      You may use the money for whatever that you like!

    • Mr. Ueno

      Hi Mr. Lau,

      I have recently fully settled my housing loan. The current market value of my house is RM500k. Is it advisable for me to refinance my house so I would have new fund for my investment in property? What are pros & cons? I know that I will need to make monthly payment for the new loan and my property investment could not be sold easily in short term. Thanks for your advice.

      • KCLau

        Mr. Ueno,

        You will have more cash in hand to do investment if you refinance your house. As long as you can make better return than the interest rate charged by banks, why not?

    • kelvin

      kc lau,

      Good to hear so many good advice from you.
      I need some expert advise like you.
      We knew that the current world and asia economy have ease a lot compared to last year, im still looking at opportunity. With the tumble of US economy caused by sub-prime led recession, the US economy are still not back to track and are being pull back by the high unemployment rate (10%) which led the de-value of US currency. Many investors had hedge with gold which made the gold price soar. Im currently looking on the Unit Trust that invest in US equity markets and forex of US currency. Do you think is a good way for medium term investment (5 years).

    • Lynn

      Hi, thanks for sharing. Based on few calls with OCBC customer services, they say, interest rate can be reduced if I meet 3 conditions, which i should meet next year. i must say I am sceptical considering i was advised to call the center again, rather than having it black and white. On top of that, I am extremely unhappy with the services. thus, the dilemma.

      But probably, I will go with your advise. Thanks again.

      • ronmahsih

        To Lynn.

        Try to communicate with the call center for the possibility of negotiating the whole thing now. Be brave.
        Some banks like RHB is willing to offer its existing customer refinancing before the lock-up period ends. They rather lose a bit than losing a customer altogether.
        CIMB is offering the most flexible housing loan in term of period of payment.
        OCBC group (headquartered in S’pore) is badly affected by the Lehman Bros’ closure. They could be in for negotiation with existing customers now.

        As for rental, unless you can assign a good agent to maintain it, you’ll always be on the losing end. The only good customers seems to be the expatriates, coz paid by their employer. They only look for in the prime areas i.e. KLCC, fully furnished. If you do it on your own, maintenance fee, cukai pintu, repair etc will eat up more than the rental. So, forget it.

      • Cuka masam

        To Lynn,

        Don’t give up ! after few times rejected by OCBC, finally my home loan interest had been reduced to current rate. They allowed the loan restructuring (with no legal fee :D) when only your existing loan reach the 4th year… ! So, all the best to u

    • Lynn

      kclau, actually, i have a situation needing your advise…

      i bought my apartment in 2007 (RM119k), locked in for 5 years to 2011. current value is rm130k. initial plan was to rent it out once we buy a proper house. term loan is 30 years. and the bank is not revising the monthly installment payment. i can only ask the bank to reduce interest rate i.e. from BLR-0.28% to maybe BLR-1.5% or 2% maybe, next year, march-july 2010.

      would it be wise to refinance now (penalty fee is rm3k) to get the better interest rate from other bank? would the bank be willing to bear the penalty fee?

      should i wait for next year and ask for lower interest rate, then, rethink until reach lock in period in 2011? probably refinance then, but might miss the rate now, though later the apt price also can be higher?

      i am thinking of renting it out and keeping for at least 10 years, and not selling so soon. at the same time i would like to get lump sum cash if i refinance…but refinancing now, doesnt give me the cash, though i felt liek i am paying too much of bank interest.

      • ronmahsih

        I’d like to answer this this based on personal experience.

        Banks will NEVER waive the penalty unless you have a really good connection.
        Banks will NEVER revise the interest rate in your advantage unless..again..you have a really good connection.

        So, wait until 2011 unless you can bear the 3k penalty. Anyway, if the savings are way above 3k, I would do it now.

        As for renting, unless the rent is really good (much more than you pay for the monthly payment), it is a waste of money.

    • doralin

      I just begin to learn about personal finance this year, and it so hard. I am 26, working, has a stable job, but having problem with my PTPTN loan. The monthly charges is so high. Currently the charges is around RM 60 plus, unless I pay it a lot, the monthly charges will also be reducing. What can you recommend me how to pay this loan?

    • Lynn

      agree with bujang there. thanks kclau.

    • bujang

      “In the long run, you will be able to save more if you settle your high-interest debt first. ……Investment return is not guaranteed. But debt interest charges reduced are for sure!!!!”

      Thanks… this caught me the most while reading all the other details, has been a passive follower of your site..

    • Lai

      Hi Lau,

      After refinancing my home loan, I have an excess of RM70K. With this money, I have 2 questions:
      1) Should I settle all my other debts (personal loan, credit card, etc)? My income is sufficient to cover all monthly repayments.
      2) Save/Invest the money and being charged the monthly interest? My opinion, just by saving using my monthly salary, it will take me a while to reach this figure.

      Appreciate your feedback.

      • KCLau

        Hi Lai,

        Normally, the consumer debt such as personal loan and credit card incur higher interest rate.
        Settling those debt ensure your return almost immediately.
        1. You should settle the debt (except mortgage and car loan) with the excess of RM70k. However, I know that you won’t feel secured when your cash are all used up to pay debt. You can consider to pay partial of the debt.

        2. In the long run, you will be able to save more if you settle your high-interest debt first. Investment return is not guaranteed. But debt interest charges reduced are for sure.

        Take care!

    • RockYourVote.net

      Consolidating Personal Loan, Mortgage and Credit Card Debt…

      Managing debts…

    • icemanbudiman

      This case study is fantastic… easy to follow and most of all, it’s practical.

      Hope to see more of these KCLau…

    • […] low interest or interest-free period when you transfer balance. Instead of paying many small debts, consolidate them and only focus to settle one […]

    • Seyed Abdul Rahuman

      Hi Lau

      I always wanted to have a mortgage software of my own.But I do not have much knowledge of computers.I saw your mortgage analysis software. How do I own one? Please advise?

      • KCLau

        The one I have is developed by bankers for their agents and mortgage officer.
        I think you can get a decent mortgage calculator on the Internet. Just Google for it.

    • mary

      I am a sole proprietor ship. I being this business about few years. Since my trading having a loss, I in debt of personal loan (from friend), credit card loan to pay my car, rental….etc. So at the end of the year, my trading account show “amount owing to director RM30”. I was afraid one day, TAX department will asking me where did the money come from ? because my trading account show loss, secondly I didn’t have any other income.

      Would you please advise me how I gonna to manage my personal tax ?

      • KCLau


        I think you don’t have to worry about tax issue at this moment. If I were you, I will be worrying about how to put the business back on track to have positive cash flow, then to settle the outstanding debts.
        I think tax department won’t be querying you at this moment. If they do, you just need to show proof of borrowing the money (credit card statement, friend’s statement etc)

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