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Agensi Kaunseling dan Pengurusan Kredit Aras 8, Maju Junction Mall 1001, Jalan Sultan Ismail 50250 Kuala Lumpur Fax : 03-2616 7601 E-mail: enquiry@akpk.org.my AKPK First Edition 2011 The copyright of this book belongs to Agensi Kaunseling dan Pengurusan Kredit (AKPK). This book or parts thereof, may be reproduced, translated, or transmitted in any form with prior written permission from AKPK only for the sole purpose of education. No monetary gain in any form should be made or derived, whether direct or indirect from such reproduction.

ISBN 978-983-44004-2-2

Disclaimer: The information contained in this book is solely for educational purpose. It is not intended as a substitute for any advice you may receive from a professional financial advisor. Agensi Kaunseling dan Pengurusan Kredit (AKPK) disclaims all and any liability to any person using the information in this book as a basis for making or taking an action. While all efforts have been made to make the information contained in this book accurate, AKPK seeks your understanding for any errors or omission. The names and details of individuals in the real life cases have been changed to protect their identities.

aPPEnDiCEs
1.1 sample of budget and cash flow statement of En Johan (age 29) Personal Monthly Budget with Cash Flow statement actual Cash Flow RM 3,900 3,900

item

Budget RM 3,900 3,900

Salary (net of EPF, SOCSO and tax) Other Sources total Monthly income Less: savings (10% of monthly income) Emergency Funds income (net of savings) Less: Fixed Expenses Rental Housing Loan Installment Car Loan Installment Car Insurance Road Tax total Fixed Expenses

390 100 3,410

390 100 3,410

400 938 125 50 1,513

400 938 125 50 1,513

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item

Budget RM

actual Cash Flow RM

Less: Variable Expenses Food House Utilities Handphone Bill Petrol Services & Maintenance Parking / Toll etc Car Repairs total Variable Expenses Less: Discretionary Expenses Medical Expenses Clothing Entertainment Household Item Personal Items Gifts Other Expenses total Discretionary Expenses Excess / (Deficit) 40 100 50 90 100 100 100 580 0 80 100 50 129 50 409 30 600 140 100 225 100 102 50 1,317 630 143 115 300 150 120 1,458

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1.2

Use this worksheet to prepare and track your own budget and cash flow. Personal Monthly Budget with Cash Flow statement actual Cash Flow RM

item

Budget RM

Salary (net of EPF, SOCSO and tax) Other Sources total Monthly income Less: savings (10% of monthly income) Emergency Funds income (net of savings) Less: Fixed Expenses

total Fixed Expenses

117

item

Budget RM

actual Cash Flow RM

Less: Variable Expenses

total Variable Expenses Less: Discretionary Expenses

total Discretionary Expenses Excess / (Deficit)

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1.3

Example of En. Johans net Worth statement item asset RM Liability RM

savings Savings Accounts Current Accounts Fixed Deposit Accounts Cash on Hand 3,100 1,800 25,600 500

Properties/Personal Belongings Apartment House Land Jewellery Car 7,600 50,000 56,250

investments Employee Provident Fund (EPF) Unit Trust Shares 63,000 16,000 6,000

Loans Credit Cards Study Loan Borrowing from friends & family Other Loans 1,200 7,200

total

173,600

64,650

net Worth (assets - Liabilities) = RM108,950

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1.4

Use this worksheet to prepare your own net worth statement item asset RM Liability RM

savings

Properties/Personal Belongings

investments

Loans

total

120

net Worth

4.1

advantages and disadvantages of new versus used car new car advantages Features: More option to match your needs (the make, colour etc) Latest technology hybrid etc Safety (alarm, ABS, air bag etc) Reliability: No worries about past history Low maintenance Longer warranty period Financing: Easy to obtain Higher margin Cheaper rates Longer tenure Higher financing costs over the tenure Disadvantages Cost more High depreciation at least 10% in the first year. Thus loss is higher on resale Higher insurance premiums

Used car advantages Generally costs less More affordable Cost may be low enough to buy on cash, therefore less hassle Lower insurance premium Financing May be difficult to obtain Lower margin Higher rates Shorter tenure Disadvantages Features Less option

Reliability Uncertain past history Higher maintenance No warranty PUSPAKOMs inspection

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4.2

interactive exercise hP computation table

Car Price (RM) HP Rate (Flat) Down Payment Loan Tenure (Years) Computation Down Payment (RM) Loan Required (RM) Total Interest (RM) Total Loan (Principal + Interest) (RM) Monthly Installment (RM)

55,000 5% 10% 5

55,000 5% 10% 7

55,000 5% 30% 5

55,000 5% 30% 7

5,500 49,500 12,375 61,875 1,031

5,500 49,500 17,325 66,825 796

16,500 38,500 9,625 48,125 802

16,500 38,500 13,475 51,975 619

4.3

steps to repossession step 1 Pre-repossession A pre-repossession notice (fourth schedule) will be served on you (personally delivered or sent by registered mail to your last known address) and your guarantor. This is a 21 days notice in writing from your banking institution to inform you that it intends to repossess the vehicle. This will be followed by a second notice, 14 days after the fourth schedule notice. What can you do? You have two choices, both of which must be acted upon before the expiry of the 21 days stated in the fourth schedule notice to avoid repossession: Pay the outstanding arrears as stated in the fourth schedule notice; or Return the vehicle to your banking institution and pay any outstanding debt.

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step 2 Repossession of your vehicle Upon the expiry of 21 days in the fourth schedule notice, repossession is allowed if you fail to pay the outstanding arrears. step 3 Post-repossession notice Upon repossession of the motor vehicle, your banking institution will send a notice in writing informing you that it has taken possession of the vehicle. This will be followed by a fifth schedule notice to you and your guarantor. What can you do? You have three options, all of which must be acted upon before the expiry of the 21 days as stated in the fifth schedule notice: Pay all outstanding arrears and out of pocket expenses (includes cost of storage, repair or maintenance, cost of repossession and re-delivery) incurred by the banking institution to take back possession of the motor vehicle; or Repay in full the balance due and settle all out of pocket expenses (includes cost of repossession, storage, repair or maintenance); or Introduce a buyer to purchase the motor vehicle at the indicative price in the notice.

step 4 notice on disposal of motor vehicle If the amount due under the fifth schedule notice is not paid within 21 days, your banking institution can sell the motor vehicle through a public auction by giving you a notice 14 days before the date of the auction or conduct a private sale to sell the motor vehicle. step 5 selling the motor vehicle

Sale of the motor vehicle can take place after the 14 days notice. As auction prices are based on forced sale value, it will be lower than the prevailing market value. The auction price may also reduce at each subsequent auction carried out. If proceeds from the sale of the motor vehicle are inadequate to pay the outstanding amount due, your banking institution will recover the shortfall from you. You will also need to bear the auction expenses.

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5.1

Buying a house: other fees or costs When buying a house you will need to budget for certain fees and charges, some of which are: a) Sale and Purchase Agreement: Legal Fees Disbursement fees (miscellaneous fee, title search etc) Stamp Duty Stamp Duty (transfer) = 1% 2% 3% 4% for for for for the 1st RM100,000 RM100,001 RM500,000 RM500,001 RM2 million amounts above RM2 million

b)

Loan Agreement: Legal Fees Disbursement fees (miscellaneous fee, valuation etc) Stamp Duty Stamp duty = 0.5% of the loan amount

Legal fees

= 1% for the 1st RM100,000 0.5% for RM100,001 RM5 million 0.25% for amounts above RM5 million = Between RM1,000 RM3,000 (Based on the property) = 0.055% of sum insured

Disbursement fees & other miscellaneous charges Insurance costs (Fire/House owner)

It is best that you allocate an additional budget of 5% to 10% of the purchase price to cover for all these charges. The above fees and charges are subject to changes.

Remember: Buying a house is not just paying the monthly installment, there are other costs such as the assessment, quit rent, maintenance fees, utilities

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gLOssaRy
Base Lending Rate (BLR) A minimum interest rate calculated by banking institutions based on a formula which takes into account the institutions cost of funds and other administrative costs. CCRis Central Credit Reference Information System, which is a computerised database system developed and maintained by the Credit Bureau to collect, process, store and generate credit information. Creditworthiness A creditors measure of an individuals ability to meet debt obligations. Comprehensive Cover An insurance policy that provides wide coverage towards loss or damage of your own vehicle due to an accident, fire or theft, and in relation to third party injury and death and property loss or damage. Disbursement Fee Various types of fees such as registration of charge fee, land search fee, bankruptcy search fee incurred by banking institutions and solicitors attending to the loan documentation, in relation to the loan, which are payable by borrowers. Foreclosure Legal action available to the banking institution for recovering outstanding sums owed by a borrower who has defaulted on his/her loan. The property pledged by the borrower to secure the loan is sold, and the proceeds of the sale are used to settle the outstanding loan amount. Fraudulent transaction (credit card) A transaction unauthorised by the cardholder. Such transactions may occur as a consequence of credit cards that are lost, stolen, not received, issued on a fraudulent application, counterfeit or other fraudulent conditions as defined by the credit card issuer. gross Monthly income The monthly income before deducting income tax, zakat (if applicable), Socso, EPF, financing installments or other deductions plus any additional income from overtime, commissions and other sources. house holders insurance An insurance policy that covers the contents of the house, such as furniture, theft, flood and fire. This policy does not cover damage to the house itself.

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homeowners insurance An insurance policy that combines liability coverage for a homeowner together with protection from damages caused by wind, fire, vandalism and other risks. identity theft Is a form of fraud or cheating using another persons identity in which someone assumes that persons identity, typically in order to access resources or obtain credit and other benefits in that persons name. Late Payment Charges Interest charged on the overdue installment payment, calculated on a daily basis. Loan Lock-in Period This is the minimum period borrowers are required to maintain their loans with banking institutions without being subjected to any penalty. Loan tenure Number of years taken to fully repay the loan principal and interest as agreed under a specific repayment programme. Margin of Financing The financing amount granted by the banking institution, expressed as a percentage of the value of property pledged to secure the financing. Mortgage Reducing term assurance (MRta) A term insurance which reduces over the tenure of the loan. This form of insurance is used to provide cover for the outstanding loan amount, in the event of death or total permanent disability of the insured. Overdraft A type of credit facility granted to the eligible current account holder. The borrower is allowed to issue cheques exceeding the credit balance in the current account but subject to the pre-approved limit granted by the financial institution. Prepayment Payment of all or part of a loan before maturity. Prepayment Penalty A fee charged by financial institutions for early payment of loan in full. The fee charged is usually based on a percentage of the loan amount or X months of interest. Principal The amount borrowed from financial institutions, excluding interest and other charges. Rebate Partial refund of the term charges (interest) calculated according to a formula stipulated in the Hire-Purchase Act 1967, if the hirer made an early settlement.

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Refinancing The process of paying off a portion or the entire amount of the existing loan with the intention of obtaining another loan from the same or another banking institution. Repossess When the owner of the motor vehicle (i.e. banking institution) takes back possession of the motor vehicle from the hirer. sale and Purchase agreement A written contract signed between the intended buyer of the property and the developer or seller of the property, stating among others, the terms and conditions under which the property will be sold. shariah The law of Islam, that covers every aspect of life, based upon the Quran, Sunnah (sayings and deeds of prophet Muhammad p.b.u.h.), Ijma (consensus of Muslim scholars) and Qiyas (analogy). stamp Duty on Loan agreement The duty payable to the Government (Stamp Office) for the stamping of an agreement, in this case, the Loan/Facility Agreement. Duty payable is based on the loan/facility amount. The current rate is 0.5% of the loan/facility amount or RM5 per RM1,000. term Charges Total interest charged on the hire-purchase facility and is calculated based on a flat rate on the amount financed over the duration of the facility. third-party cover An insurance policy that covers claims made against you by a third party for injuries or death of the other person (third-party), as well as loss or damage due to an accident, fire or theft.

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sELF assEssMEnt
Answers:
Chapter 1 1. A 2. D 3. D 4. B 5. C 6. C 7. B Chapter 3 1. D 2. C 3. D 4. C 5. C 6. B 7. C 8. D 9. A Chapter 5 1. D 2. C 3. A 4. C 5. A 6. C 7. A

Chapter 2 1. B 2. D 3. A 4. D 5. A 6. D

Chapter 4 1. D 2. A 3. D 4. C 5. C 6. B 7. C

Chapter 6 1. D 2. A 3. C 4. D 5. B 6. A 7. C

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