These days, having a car becomes more of a necessity than a luxury. Even though there are more public transport being offered to the public, such as ride-hailing services, public commuters and taxi, there are still people in the rural area suffering from the scarcity of public transportation. A car loan is worth to take note if you’re planning to purchase a car. MyCarsearch is here to explain the myths about car loan and what you should take note before the purchase in order to save your wallet in a long run.
Q: What is hire purchase?
The term hire purchase is derived from the fact that when you take up a car loan, the car technically belongs to the bank. You are seen as "hiring" the car from the lender until you finish paying up the car loan, that’s when the ownership of the car is then transferred to you.
Q: Can I get zero down-payment?
Most car loans in Malaysia have a maximum margin of financing of 90%, so you should always expect to pay at least 10% upfront to the car dealer. By saving up and paying a higher down payment, you will be able to service a lower loan repayment for a shorter tenure. This means you will be paying less interest.
Q: What documents do I need to prepare?
Q: What is the lowest requirement to get car loan approved?
In Malaysia, it is quite easy to get car loan approved. However there are no certain benchmark to make sure your car loan will be approved by bank. However, be prepared that there are chances that you might need to increase the down payment amount and lengthen the down payment period in order to own a car. According to iMoney, financial experts recommend that your total debt obligations should not exceed 36% of your gross income. Here are some calculation that determine your true affordability to buy a car.
Gross monthly income: RM4,000
36% of your gross monthly income: RM1,440
Total debt commitments: RM1,000
How much can you afford to pay for your car repayment?
RM1,440 – RM1,000 = RM440
In that case, for those who do not have any commitment, your monthly instalment is permissible to go up to RM1,440. Please take note that above figure is only for reference and it does not represent any bank.
Q: Is there any difference between Islamic finance and conventional finance?
Islamic Financing avoids interest-based transactions, and instead introduces the concept of buying something on the borrower’s behalf, and selling it back to the borrower at profit. The conventional financing is taken place the borrower making payment over a set tenure by installments. A portion of each installment paid goes towards servicing the interest, while the remainder goes towards paying down the principal. The sooner one can pay off the principal, the cheaper the interest amount. The differences between both loans are minimal and it all dive down to one preference. (SOURCE: LOAN STREET)
Conventional finance > Islamic finance
Islamic finance > Conventional finance
Q: Can I buy a car with CCRIS or CTOS?
The Central Credit Reference Information (CCRIS) provides credit reports and is managed by the Credit Bureau of Bank Negara Malaysia. CTOS is a private company which provides credit reporting and is also widely used by financial institutions to determine an applicant’s creditworthiness aside from using CCRIS.
CCRIS will shows negative credit and positive information like your credit approvals and positive repayment history. At the beginning 2015, PTPTN defaulters have been put under close scrutiny while serious defaulters will be blacklisted on the CCRIS database. How to get yourself removed from CCRIS? CCRIS shows repayment records of the last 12 months only and will be removed after case closed.
CTOS provides opinions, ratings, rankings or recommendations on an Individual’s or Company’s credit worthiness. Unlike CCRIS, CTOS records will be kept indefinitely as an historical archive of one’s history and experiences. (SOURCE: LOAN STREET)
Conclusions, yes, you can purchase a car under CCRIS watch-list, as long as you have done the settlement and after a period of 12 months, you are allowed to take a car loan again. Yes, you can purchase a car under CTOS watch-list. However, do not think you can get away with PTPTN, one that being blacklisted will not able to get personal loans, car loans, home loans, business loans or credit card.
Hopefully you will leave this article with more knowledge about car loan. Remember to always be on a look out for your credit history as it might the worse barricade in between you and your new car.