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Personal loans can come in handy to supplement our needs, whether to fund a small home-based business or to purchase specific high ticket products at a point in 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 loan feature available to users via 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, tenure, and creditworthiness.
By collaborating with CIMB Bank through its e-Zi Tunai Personal Loan service, the TNG feature was approved and is regulated by Malaysia’s central bank, Bank Negara Malaysia.
One must select 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 an early settlement.
With their high approval rates, applying for GOpinjam shouldn’t be that difficult. 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 entice customers to return, TNG offers instant approval on the application, which benefits users by negating the need to go through the submission process again. But I believe this depends on whether the customer is a good pay master and without any outstanding payments from the previous loan.
After approval, the funds will be disbursed to the user’s e-wallet account, which can be used to pay merchants directly or transferred to a bank account via DuitNow.
How would this come in handy?
Short answer: when you require immediate cash.
Long answer: For instance, if you find yourself in an emergency situation where having cash would be beneficial, the GOpinjam credit facility enables you to obtain cash without having to undergo a lengthy credit assessment process. This process could take up to two weeks, depending on the bank. On average, most banks will process your request within a couple of working days.
As a last resort, some individuals may borrow money from unlicensed moneylenders known as ah longs or loan sharks. We all know that this is never a good idea as they charge notoriously high interest rates, and according to some, possibly up to 40% of your loan. If you fail to repay, they may resort to using physical force and threats.
However, TNG aims to help those that do not have good credit scores or simply do not meet the minimum salary requirements to qualify for a personal loan from traditional banks.
“The financial inclusion element was always 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,” stated Effendy Sharul Hamid, the Group CEO of Touch ‘n Go.
Apart from that, another advantage of GOpinjam is that you can borrow small amounts starting at RM100. Nevertheless, it would not be advisable to do so for such a small amount, if you can find other ways of obtaining it.
The cost of borrowing
The new TNG digital loan offers an annual interest rate between 8% to 36% per annum (p.a.). According to the team, the 36% p.a. is for loans below three months in tenure. This may be considered quite high by some and has come under public scrutiny, but BNM has released a statement clarifying that there are “safeguards in place”.
To give you a comparison, here is a summary of interest rates from various credit facilities.
An overview of varying interest rates
|Credit Facilities||Interest rates (p.a.)||Minimum Salary Requirements|
|TNG GOpinjam||8% – 36%||RM800|
|Credit Cards||15%||From RM2,000|
|Personal Loans (Banks)||3.99%-9.99%||From RM1,500|
|Cash Instalments (Credit Cards)||From 6.88%||For Cardholders|
To be as precise as possible, only banks with loans up to RM10,000 and a maximum tenure of 12 months are compared.
At the time of writing, Alliance Bank offers the lowest personal loan interest rate on the market, charging 3.99% of the total amount per year (depending on how high the loan amount is and how long the repayment plan is).
Even so, the minimum monthly salary requirement for applying for the above product is RM3,000, making it inaccessible to low-income individuals.
Bank-set interest rates also vary according to a variety of factors. This includes loan tenures (the length of time required to repay the loan), credit scores, loan size, and debt service ratios (how much you owe in comparison to how much you earn).
Personally, I believe that 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 when compared to other banks’ personal loan offerings.
The interest rate begins at 0.66% per month, or 7.92% per year. Additionally, Aeon Credit has an easy approval process that you can take advantage of if you have a poor credit history or have not established credit yet.
In comparison to credit cards
GOpinjam’s rates are significantly lower when compared to credit cards. If you have credit card debt, you should be aware that the interest is compounded daily. This means that your card issuer will charge you interest daily on your balance, which will continue to grow a little faster day by day.
While credit cards may appear to be expensive, they are also well-known for their cash instalment options. Cardholders are able to obtain 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 via its EzyCash product. This implies that with a credit limit of RM12,000, I could choose to withdraw RM8,400 and pay it back in monthly instalments at an interest rate of 8.88% per annum (p.a.). It offers me convenience by eliminating the need to apply for a separate loan.
Most credit cards now offer Easy Payment Plans (EPP) for large purchase items such as mobile phones, laptops, washing machines, and more. These plans typically have a 0% interest rate and can stretch up to 36 months. Thus, the cost of borrowing money is close to nothing.
It comes with risks
Because TNG’s target market is low-income individuals, some may argue that it is a dangerously short-term solution with potentially long-term consequences.
If you miss a payment or default on your loan, you face the risk of being blacklisted and having a negative impact on your credit reports. This means that you will almost certainly be unable 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 any minor fees. This can be a very high cost of borrowing and is something you should avoid if you think you will not be able to repay the loan in full.
One other similar credit facility that you should consider looking at is BigPay’s new digital loan. It has similar features and a lower interest rate of 8% p.a., although its loan offers and tenure differ quite a bit.
There certainly seems to be much demand for such services, if all the recent launches of buy now, pay later and micro loan offerings are anything to go by. Plus there’s the current special EPF withdrawal of up to RM10K too, which we saw many Malaysians receptive to.
Whether it’s withdrawing RM10,000 from EPF or taking a micro loan for specific circumstances though, there are ways to be smart about it, as Malaysian finance bloggers shared with us here.
Whichever option you prefer, bear in mind that taking on debt requires considerable thought and calculation.
In difficult times, you should think about taking out a personal loan only when absolutely necessary, for critical and urgent things that only you can justify for yourself.
To determine if GOpinjam is the right fit for you, you must also take into account your financial situation. Are you earning a consistent income? Have you considered additional monthly expenses?
The bottom line is that, while we have discussed the pros and cons of taking up GOpinjam, the decision to apply should not be made hastily. Take time to carefully weigh all of your options as well as evaluate the risks that come with them.