power! borrowing basics

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POWER! BORROWING BASICS

28 JAN 2014

DESMOND CHONG

AKPK set up by BNM on April 2006 to provide:-

Financial Education

Credit Counselling

Debt Management

All services to individuals are

FREE OF CHARGE

AKPK DATA BASEDPARTICULAR PERSON

Credit Counseling 248,491

Debt Management Program

100,871

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REASON FOR DEFAULT

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OPEN YOUR EYE

SOMETHING DIFFERENT!

LIFE CYCLE

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GOAL

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CAN’T SEEN！

GOAL MUST BE SEEN

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WHAT IS POWER!

Programme provides young adults

& prospective borrowers with

practical financial knowledge &

debt management

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CONTENTSChapter 1 - Cash Flow Management

Chapter 2 - Borrowing Basics

Chapter 3 - Wise Usage of Credit Card

Chapter 4 - Buying a Car

Chapter 5 - Buying a House

Chapter 6 - Managing Your Debts

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“To borrow or not to borrow?”

…….that is the question!

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WE ALWAYS LOSS

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HARD TO GET

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HK RICHEST : LE KA SHENG

M’SIA RICHEST : ROBERT KUOK

THEY CAN GET IT

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CREDIT & DEBT

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RULES OF BORROWING

For productive purpose only

Within your means

With a moral commitment

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Licensed financial institutions

Co-operatives

Licensed money lenders

Unlicensed money lenders

Browse website of BNM at www.bnm.gov.my for a complete listing of licensed financial institutions

COMMON SOURCES OF BORROWING

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DEBT TO INCOME RATIO Important factor in credit assessment

Ratio = Monthly loan repayments x 100Net monthly income

General rule: Ratio should not be mora than 40%

En. Daud’s gross monthly income is RM3,800. His total monthly loan repayment - housing, car payment & credit cards is RM2,128

= RM2,128 x 100%RM3,800

= 56%

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RISK OF GUARANTOR Guarantee is risky for guarantor

Responsible for unpaid portion of loan, including interest if principal borrower defaults

Think first before agreeing to be a guarantor!

Ensure guarantee for loan is for productive purpose

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Types of Interest RatesFlat rate

Interest is calculated upfront on amount of money borrowed over entire loan tenure(Hire Purchase & Personal Loan)

Fixed RateInterest is calculated based on a reducing balance, whereby interest rate does not fluctuate during loan tenure(Housing Loan)

Floating RateInterest is calculated based on a reducing balance, whereby interest rate is tied to an index or base rate & fluctuates over loan period. Common index or Base lending Rate (BLR)(Housing Loan/Overdraft)

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Interest is paid on principal & on accumulated past interest

Interest calculation can be on a daily, monthly or annually rest

Advantages: More return on investments

Disadvantages: More interest payment on loans

COMPOUND INTEREST

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PURPOSE

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PAY CAPABILITY

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PAYMENT HISTORY

Make Prudent Financial

Management a Way of Life

Website: www.akpk.org.myToll Free Number: 1 800 88 2575

THANK YOU

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