Personal loans, vehicle financing, housing loans, business loans and credit card debt are the top 5 factors causing Malaysians to go bankrupt according to the Malaysian Department of Insolvency (MDI). As of December 2019, the total number of Malaysian being declared bankrupt is a whopping 299,186. A statement from theEdgeMarket, there were 8,351 bankruptcy cases in 2020 and for the first four months of 2021, the number of cases amounted to 2,954. Despite the pandemic, job losses reported and economic recession the trend continued to decline.
However, with that said, you have to be aware of the crucial factors listed down below. Sometimes these signs may be the only thing keeping you from bankruptcy, if you see them, you may be heading towards a serious debt problem.
1. Missing too many payments and creditors are calling
If you have been late on your payments, creditors will always be the first of your worry, who may file a bankruptcy case against you. This would be the biggest warning you can get as your creditors will serve you a bankruptcy notice. There is a saying, ‘prevention is better than curing’, it is applicable to your debt management. Remember, the longer you delay repaying them, the worse it will become.
2. Foreclosure and repossession of assets
Failing to make timely payments on your car and properties will cause foreclosure and/or repossession of assets by the lender. This is shown clearly whenever your lender notices that you stopped repaying your loans for some time. It evidently means you are in danger of your financial situation.
3. Cash advances on credit cards
When you are falling behind on paying your bills, the worst possible action to take is to turn into credit card cash advances. This is because cash advances have much higher interest rate than usual. They cost you 5% of the withdrawal with an additional daily interest rate.
4. Maxing out on credit cards
Credit cards are a very dangerous for those who are bad with money management. You will head into a vicious debt loop if only the minimum amount of your monthly credit statement is paid. It is crucial to use your credit card prudently by following the general rule of thumb which is no more than 30%-40% of credit limit at a time. This allows flexibility for any issues or threats to your income like job loss, divorce or illness etc.
5. Being a guarantor of a loan
You may find it surprising but there is a risk of being helpful too. Co-signing a loan for someone who has risk of defaulting on loan payments is a common factor that causes bankruptcy cases. You need to be cautious if the beneficiary even it is a family member or close friends. Therefore, just focus on dealing with your own debt repayments and realise someone’s action will cause bankruptcy.
6. Bad credit scores
Trying to apply for a business loan yet no banks approve? You probably have bad credit scores. Missing loan payments, using up all available funds of your credit cards and being a guarantor can lead to your credit rating taking a hit. All these will cause your credit score to decrease to an all time low and any new loan application will be rejected. Therefore, bad credit scores affect you more than you think. To have a clean credit report, payment of loans and bills have to be on time
If you are looking for capital to fund or expand your business, Finsource Credit offers different types of loans that will suit any of your business needs. These include clean loan, property secured loan & 2-in-1 financing. Their professional financial advisors will answer any of your inquiries 24/7 if you ever have one.
Contact us today to learn more!
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