14/06/2025
3 𝑬𝒔𝒔𝒆𝒏𝒕𝒊𝒂𝒍 𝑭𝒂𝒄𝒕𝒔 𝒂𝒃𝒐𝒖𝒕 𝑳𝒐𝒂𝒏 𝑰𝒏𝒕𝒆𝒓𝒆𝒔𝒕 𝑹𝒂𝒕𝒆𝒔
📈📉Apart from benefiting banks, do you know how loan interest rates work?
🇲🇾🇲🇾Loan interest rates can be categorized as fixed or variable.
Regardless of market fluctuations, fixed interest rates, as the name suggests, remain the same throughout the loan tenure. On the other hand, variable interest rates adjust based on the Standardized Base Rate (SBR) regulated by the central bank of Malaysia (BNM - Bank Negara Malaysia). Your actual interest rate, known as the Effective Lending Rate (ELR), is determined based on the bank's Base Rate (BR). Since the BR is calculated considering factors such as each bank's funding cost, statutory reserve requirements, borrower's credit risk, and operating costs, it varies among banks. For different types of loans, most ELRs remain fixed for a specific period before becoming variable.
Therefore, apart from the SBR and BR, your ELR is influenced by your credit history, loan amount, and income level.
In a nutshell:
1️⃣ The better your CCRIS and CTOS scores, the lower the interest rate.
2️⃣ Longer repayment tenure and higher loan amount result in higher interest rates.
3️⃣ With a certain amount of disposable income after deducting basic expenses, the interest rate tends to be lower.
It's essential to understand that interest rates are only a part of the overall loan cost. Other factors, such as the market economy, also affect the overall expenses. When determining which loan suits you best, it's crucial to compare offerings from different banks and seek the lowest interest rate.
If all this seems complicated, don't worry! 😲 You can consult YCE Management, where our team of financial experts provides professional financial advice and is available 24/7 to answer your questions.
Contact us to find out more
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