Bad shopping habits and low salaries causing many Malaysians to go into debt

Petal JAYA: Many Malaysians earn less than enough to survive but spend more on unnecessary things.

Thanks to the ready availability of personal loans and credit cards, they were able to continue on the path into debt.

Finwealth Management Sdn Bhd Financial Planning Director Felix Neoh pointed out that the habit of borrowing money regardless of one’s ability to repay has led many to financial ruin.

“And unless salaries go up with the cost of living, many others will get into financial trouble,” he said The sun.

The Covid-19 pandemic has left many more Malaysians in debt, according to a recent report.

The report said Bank Negara Malaysia’s Credit Advisory and Debt Management Agency (AKPK) has helped many avoid bankruptcy, especially those in the low-income group.

Personal loans accounted for nearly half of all bankruptcies. From 2017 to October 2021, a total of 22,756 people had problems repaying personal loans, followed by 10,568 people who were unable to service their rental car purchase, 7,043 people who were unable to repay business loans, and 6,704 people who were unable to repay home loan installments.

A total of 21,804 bankruptcies were 35 to 44 years old, while 45 to 54 year olds accounted for 15,272 cases.

Neoh noted that many Malaysians continue to receive very low salaries even though the companies they work for are making huge profits.

“The wealth gap here has widened and the worker pays the price,” he said.

He pointed out that when the value of money goes down, prices rise but incomes stagnate, so many are unable to save for a rainy day.

Neoh said the large number of people hard hit by the recent floods is an example of the magnitude of the debt problem.

However, low income is not the only factor. Neoh said that many people also tend to spend their disposable income on unnecessary things. If you don’t have the cash at hand, you end up buying on credit.

“There’s easy access to personal loans to make ends meet or buy new items, and woe to those who can’t keep the payment schedule,” he said.

“You’re just digging a deeper hole.”

Neoh also advised against withdrawing funds from the Employees Provident Fund (EPF) to meet immediate debts. “Aside from retirement plans or buying a home, diving into EPF savings is not a good idea.”

He added that many who lost their jobs due to the economic fallout from the Covid-19 pandemic have already made multiple withdrawals under the i-Sinar program to help them navigate lean times.

He said those who don’t earn enough to put some money aside each month will count on EPF savings after they retire.

“But such deductions have seriously affected many people’s retirement savings.”

Fortunately, that’s not the end of the road. People in financial difficulties can regain control of their lives through the AKPK Debt Management Program (DMP).

The agency helps by creating an individual debt settlement plan for the person seeking help.

The plan is developed in consultation with the bank.

However, if you want to go this route, you have to prove that you still have money after paying all expenses.

Apart from that, the total debt must not exceed 5 million RM, the debtor must not be in an advanced stage of a legal dispute such as a creditor application and must not already be insolvent, the agency said The sun.

As part of the DMP, credit lines such as credit cards and overdrafts are withdrawn from the debtor.

However, if he applies for a loan, the bank is free to approve or reject it.

The benefits of the DMP determination are a realignment of cash flow, reasonable payment terms, a moratorium on legal proceedings, and no harassment from debt collection agencies.

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