If you have difficulties in servicing your debt, you may take some or all of the following actions:
- Contact your banking institution and explain your problem to them. Banking institutions prefer to be alerted early when borrowers are facing difficulties in making repayments. This is to ensure that an acceptable solution can be worked out between both parties while the problem remains manageable. Generally, banking institutions will consider requests to vary repayment amount for a temporary period or restructure the loans by varying the terms and conditions of earlier loan agreements. Support your request by providing your banking institution with relevant details and supporting documents as proof of your financial position. Remember that your banking institution generally does not want its borrowers to default on loan repayments, so do not be afraid to speak to your banking institution.
- Develop a budget
- Reduce your expenses by creating a spending plan that follows from the budget. Since the budget clearly shows total expenses (fixed and variable), it is easy to see where you can reduce or cut out on any expenses. Thus, the spending plan should take into account only necessary expenses such as housing, health care, utilities and education fees. The spending plan helps you to plan your spending and to avoid unnecessary expenses and impulsive buying. For the spending plan to work, you must stick to it and make the necessary changes to your lifestyle.
- Consider using your savings or surplus funds to clear your debt. If the interest charged on your loan is higher than income earned from your savings, it makes sense to use your surplus savings (net of your emergency fund) to repay your debt. Start by paying off the loan with the highest interest rate.
- Do not commit to any new financing until your cash flow has improved. In addition, if you feel you do not have the discipline to control the usage of your cards, return and cancel all credit cards. You may also consider transferring balances of credit cards with high interest rates to ones with slightly lower interest rates.
- Try to increase your income, e.g. by getting a part time job. Any amount of additional income, along with controlled expenses, will help towards clearing your debts.
- Sell off your assets to pay your debts. For example, if you own a big house, you may want to consider selling it and buying a smaller house to reduce your debts.
Independent Advice
If you need assistance in managing your debt, you can contact
Agensi Kaunseling Dan Pengurusan Kredit (AKPK), AKPK was set up by
Bank Negara Malaysia in 2006 to offer, amongst others, consumer credit counselling and debt management services for individuals. In addition, AKPK provides financial education programmes on proper use of consumer credit and basic money management skills. The services of AKPK are offered free of charge. You can obtain further information about AKPK from your banking institution or branches of
Bank Negara Malaysia. You can also contact AKPK at the following address:
Agensi Kaunseling Dan Pengurusan KreditLegal 8.2-8.9 Maju Junction Mall
1001 Jalan Sultan Ismail
50250 Kuala Lumpur
Malaysia
Toll free line: 1-800-88-2575
Website: www.akpk.org.my
Reprinted with permission from BankingInfo (A Consumer Education Programme)
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