Personal Loan, Business Loan

More and more people are asking about personal or business loans recently. Many do not know where else to get one except from loan sharks (Ah Long). Hence they were left with 'no choice' but to take the risk to venture into whatever their dreams are. Actually there are quite a bunch of legitimate sources ...

Below show a list of sources who can give you a loan without any collateral ( tak payah cagaran )

just click on the image to view the big detail image

Some of them may not offer the loan as stated in above list anymore but they usually have other similar alternative products replacing above. So you can just call and let them know what your needs are. They should be able to offer something as they have been 'requested' by the government to 'assist' local entrepreneur.

The interest rate will NOT be LOW as it does not have collateral. But at least they wouldn't come paint your house red I suppose. It is their job to assess your ability to repay. Should things really go south and you have problem repay this loan later, you can try get help from AKPK.

The loan amount is not big in term of business sense. So you may really want to ask yourself why do you need a loan for whatever you want to do. Why haven't you had a saving that is enough for you to start a few thousand ringgits business ? If you are honest in answering that question to yourself, you may find a better way to finance your business.

Else whatever happened in the past may most probably happen again and you may face a lower success factor. Perhaps that is why you will need to pay a higher interest rate to learn the lesson the harder way, again !?

Don't forget credit card is a kind of loan too at 15-18% interest rate. Do get offer from as many sources as possible before considering which one to go for. NEVER NEVER NEVER go for the first one you encounter with.

Get Out Of Bad Debt

I briefly touched on how to reduce bad debt in a case study about a middle income guy.  And most of us are the Average Joe, so no doubt the questions of How to Get Out Of Debt persist.  Furthermore, there is a book saying that 21st century is all about Debt.

Ok, lets start with the boring, "You shouldn't have got into bad debt at the first place !"

Sorry but Honestly, personal bad debt is a pure mistake on greed and ignorance.  Bad debt is not a personal finance problem.  Its the opposite of personal finance.  As mentioned before, the only thing you MUST do in Personal Finance is to setup an automated saving system right after your income.  Bad debt is the reverse !  By using up more than your income even before the income comes in.

That would be the FIRST thing one must understand, realize and FEEL it !  Else it is not going to be any helps in reducing bad debt.  It will just come back again and again.

Secondly ofcourse we can blame it on the education we received.  Off the 12 long years of FREE and compulsory education, we didn't learn a single thing about bad debt, not to mention automated saving.  Although its not a personal finance problem, it is a global trend and it becomes a national problem where it affects our daily social life.  Crimes rate increase.  You lose job, I die.

Ok, now that we take responsibility of the problem and we get someone to share the burden, we can now look at it face to face.

The problem originates from Income, so the real solution is within income as well.  But before that, lets review some of the common advices :

1.  categorize debt by different interest rates

12-18%  Credit Card or Ah Long debt

4-8%  Car Loan ( car's actual rate is 1.9x of published rate )

5-7%  House Loan

2.  work on the highest interest rates category first

including transfer all the high interest rate loan to lower rate like using house loan to pay for credit card debt

3.  within the same category, pay off the smallest amount first !

4.  call up banks and ask for waiver or reduction

other than that, there are some uncommon methods and services offered by private agency.  Basically they work around these methods:

1.  Pay a little more monthly, cut down total number of years to save on total sum

2.  Instead of paying 18% to credit card, borrow from them and you pay only 16% etc.

3.  Changing interest calculation method from daily rest to monthly rest etc.

It is possible to have some businesses out there sincerely come up with plans to help people reduce debt.  Afterall, the ultimate benchmark for world best stock investors is only 15%.  So it makes more sense to run a Ah Long business than starting a company like Warren Buffect's  BERKSHIRE HATHAWAY

However there are more businesses out there taking opportunity out of these ignorant debtors and further exploit them to the limit by squeezing every penny out.  So my advice is approach these agencies with care, only work with those who can provide you clear figures / numbers how the system works and then you send the figures to me for verification.

Most countries have also setup proper agency to provide similar helps like above private ones.  That is a must know for poor debtors.  In zzzz, you must go to AKPK personally and ask them to help you face to face.

Ok, lets get back to this blog.  Just a reminder that all above are the common methods debt adviser would have shared with you.  They are effective ... to contain the problem, not really solving it.  This blog stresses that personal bad debt is NOT a personal finance problem.  Its problem is from income and the solution is to work on income.

So what you really need is to focus on Getting More Income to pay off the debt.

No one can go back and change a BAD beginning 

but everyone CAN create a successful ending !

And you bet double the effort is needed to correct a small mistake.

Some may curse by now what a stupid recommendation. 

"If I could earn more money, I wouldn't be in this debt at the first place !!"

Well, thats why and how this article is written.  You must first admit and take resposbility for your own mistake, then you can also blame someone for it and now you should face it to solve it yourself.  Including thinking positively how every single suggestion comes in, despite how stupid some of them may sound.

Fortunately, there are proven methods on how to increase income to solve debt.  All you need is as mentioned above, expect double extra effort to come.

Statistically 3-5% of people who started a business end with great finance success.  The unique difference in this 3-5% of people is their smartness and ability to adapt to changes.  Lets face it, how smart we are is something imprinted within us.  Its not something we can change overnight.  By the time we are as smart as we should be, debt rate has already compounded to sky level.  Afterall, if we have the smartness in us, we wouldn't have reach this bad debt situation anyway, would we ?

On the other hand, people who 'join' a human network business has 20-30% success rate.  Off the other 70% who didn't make it even though they are in the same human network business as those who make it, is because they didn't spend enough effort on it.

A Human network business that you can 'join' includes multi level marketing, insurance and mutual fund agents.

If you are serious about solving your bad debt which you admit was a mistake on your part.  Then you better focus on increasing your income.  And if you don't know how to increase income on your own.  You better temporary forget about all your preception on MLM and insurance agents.  Join them and really spend a good amount of effort on it for 2-3 years.  I guarantee you will solve your current debt problems.

Forget about morale, forget the right thing to do, forget about helping others, you have to even forget about finance planning as a matter of fact.  Your focus should be on solving your debt and you are just 'working' toward it.  You don't have to 'like' your work in this case as long as it can get you off this bad debt which is killing you.  You probably don't like your current job anyway.  And since you are already in bad debt, you probably been brain wash by some incorrect ideas.  So what's wrong being brain wash by this MLM and insurance ?  While your brain is already filled with get into bad debt procedures.

After all, both income and bad debt is NOT a part of personal finance planning.  One is the pre-requsite and another is the oppositive.

Among the 3 choices above, insurance is the safest and best choice if you don't know which to pick.  

Although MLM is  perfect in concept but in practical world, MLM is still new and there are still a lot of bad apples in MLM industry.  Since insurance industry is older and better regulated, there are really no BAD insurance companies out there, there are only less good choices.  Mutual fund is more toward finance planning or investment ideas, immediate and short term reward on mutual fund sales are less encouraging.  So to sum all up, insurance industry is the most suitable human network business for people to join to reduce their debt.

Take an example to solve a $20,000 bad debt.  You probably need to make a total sales of $60,000.  Assuming each sale is $2,000 then you will need to make 30 sales.  In order to make 30 sales, you may need to make 150 attempts.  Assuming each attemp needs 4 follow ups, then you need to prepare for 600 sessions of work.  Assuming each session is 2 hours, you will need to spend 1,200 hours in order to solve your $20,000 debt.  Now, if you spend 3 hours a day, 7 days a week, your debt can be settled slightly after a year. 

If above example is not acceptable, then you will need to have the smart in you to entrepreneur about how to get the extra income you need.  But just to beware, the 'smart' you think you have in you may be is the 'smart' that gets you into bad debt at the first place.  Just beware ... but don't let any wild imagination stop you when pursuing income.

Lastly, if you setup an automated saving system, then you are more likely to solve your bad debt problem too.  Exactly why would probably require another long topic on human psychology.  But in short, setting up such a saving system implies you already solve the 2 most original fault in bad debt, greed and ignorance.

Good luck all, I know this is a tough topic and not many people will agree but nevertheless its already proven solving many bad debts again and again.  Although these people never come back and help me propagate the right finance planning ideas, but they did get their debts solved.

Case Study : middle income group

This morning I over heard a case study from radio station 988 :

A young man earning $4000-5000 a month. $1000+ pays to house loan, $500+ pays to car loan etc and every month he has a remaining of $500 for saving. His question is what he should do with all his loans. He also has some credit card debt.

The answer given by the expert on radio is :

Use the $500 to clear all credit card debt, then car loan and then only start talking about money earn money.

While the answer given is typical and 'correct' by the standard of Personal Finance Planning, but I would want to add a few points :

1. The way the guy asked the question has a flaw. He deducts all the payment and then only come up with a saving of $500. The correct mentality is to Save First Use Later ( see old post ) If he HAD the Right mentality at the first place, he would most probably not getting into the credit card debt he mentioned. A very small difference made in approach can bring a whole different result, and that is why all I want to emphasize ( and the only thing ) is to setup a System to Automatically do saving for yourself without you having any control over it.

2. The answer given shows one of the common limitations of Finance Consultants. He also said,

Credit card is charging one of the highest interest in the market, NO finance consultant CAN GUARANTEE you ANY FINANCE return of 15% or above. Therefore, you can NEVER get any tool to over take this Credit Card Charges, therefore you HAVE TO settle it ASAP.

Again, first of all above statement is correct and what I am going to say is only an addition to it. What he was referring is FD, Insurance and Mutual Fund would probably NOT ABLE to provide you a return of 15% Consistently. If you refer back my Finance Pyramid, there is a "Stock" or share market on top of the pyramid. I leave it there to break this 15% barrier.

Many finance consultant leaves Stocks out of their portfolio due to its speculative nature and leave those to the stock broker. But

we are in charge of our own life,

and we get any 'tool'

that we can handle

to achieve any target

we want to set,

else there is really no point planning if 15% is the 'proven' limit.

The 2nd thing the finance consultant missed is ... Income. Below is one of the VERY FIRST picture I posted in this blog. This same picture is actually printed on my name card too ( coz I think all the answers are all covered in this simple picture )

Credit Card Debt is something one shouldn't get into at the first place. If you do the ONLY first 2 things I stress everybody to do ( earn an income and save automatically ), you would have a much less chance to get into credit card debt.

If you already get into such debt ...

Actually Ah Long's Debt

is the SAME as Credit Card Debt,

both are charging at 18% a year

and calculated Daily !!

Ok, if you already get into such debt, you should very well realize its a Personal Finance MISTAKE. Most often, the mistake is made because you have a GREED to be satisfied - you wanted to own something first BEFORE you have the ability to own it -

a Personal Finance Mistake is not necessary a Personal Mistake

A mistake like this DOES NOT eat into the "Automatic Saving" system I setup. It actually eats into your income. Basically if you use your future income, then you will have less income in future. Therefore,

If you get into credit card debt,

you MUST increase your Future Income

IMMEDIATELY !!

So other than paying it up, these are the potential solutions too :

1. Dispose the item to reduce debt if appropriate

2. Get a Pay Raise ( if the credit card debt is initially to increase the chance of this, then its a good call isn't it ? )

3. work 2 or multiple jobs

4. Become creative and innovative to earn more ...

In short, don't forget Income is the ENTRY stage into Finance Planning. When all else IN your finance plan can't earn you the 15% to cover up the 18% credit card charges, then you will have to RETURN to your Income and work on IT !!

Like wise if you are one of those who can never increase income, then you should very well know what to do with your scissors and credit cards. And come borrow money from me please, you may as well be my finance slave than others ... isn't it ? :)