What Is A Government Loan?

A government loan is a type of loan that the government offers to encourage entrepreneurship, innovation and provide relief to people. These loans are different from other loans in a few ways. 

First, the interest rate on government loans is usually lower than those on other loans. This is because the government wants to make it easier to afford a home or to start a business.

Other than that, the terms of government loans are usually more flexible than other loans. This means that you might be able to postpone your payments or even default on your loan if you run into financial trouble. 

Governments provide a guarantee coverage which provides a safety net for the participating financial institution and the borrower. If you are unable to repay your remaining debt, the government will pay off the rest of the loan based on the guarantee coverage.

Finally, government loans are often easier to qualify for than other loans. As mentioned earlier, the guarantee coverage is a safety net for the lender and borrower. This makes it more likely for the borrower to pay the loan back, which is a big factor for lenders. 

So, what types of government loans are available in Malaysia?

Personal Loan

Government Personal Loans Are Only Eligible For Government Servants

Unlike other loans, a government personal loan is only eligible for government employees. To apply for one, you only need a minimum monthly salary of RM1,000 a month, and you will be offered a low fixed interest rate. It’s also extremely easy to pay the loan back, as it will be deducted from your salary instantly.

Housing Loan

The Housing Loan Division was the statutory body responsible for managing public sector home financing facilities

The Malaysian Government offers a few different housing loans for its citizens. The most common is the My First Home Scheme, which is a subsidised loan offered to first-time homebuyers. The scheme helped applicants obtain up to 105% financing, providing a much easier pathway to owning their first home.

To be an eligible applicant, you must be a first-time house buyer, a Malaysian citizen with a maximum gross monthly income of RM10,000 and have no record of impaired financing over the previous 12 months.

Another government housing loan option is the Rumah Mesra Rakyat program. This program offers lower interest rates and longer repayment periods than the My First Home Scheme, making it more accessible to low- and middle-income earners (less than RM3,000 monthly gross household income). 

Student Loan

In Malaysia, you can get government student loans through PTPTN loans. These loans are offered to Malaysian students who wish to pursue higher education at a local institution. The loan amount depends on the student’s needs and the cost of the desired program. 

To be eligible for a PTPTN loan, students must be Malaysian citizens and have completed SPM or its equivalent. They must also have been accepted into an approved program at an accredited institution. The loan repayment begins once the student completes their program and starts working. 

The PTPTN loan is an excellent way for students to finance their education without taking on too much debt. The interest rate is lower, and the loan can be used for any program, including undergraduate, graduate, and professional degrees. Plus, they offer exemptions to encourage you to do well in your studies. All first-class degree holders are eligible to apply for a repayment exemption.

Students who take out PTPTN loans are responsible for repaying the money back, but the obligation is manageable and affordable. 

Business Loan

Government business loans are a very popular option among SMEs trying to expand their business venture. These types of loans usually do not require collateral, making the loan package more attractive and feasible.

A government-linked company such as SJPP steps in to bridge the gap between financial institutions and businesses. The government usually provides a guarantee coverage of up to 80%, which means they will be responsible for paying up to 80% of your loan if you are unable to repay. This makes government loans a safe bet for financial institutions and borrowers, as they both have financial protection from the government.

Besides being difficult to attain, traditional business loan packages tend to include high-interest rates and short loan tenure options. A government loan offers businesses lower interest rates and longer loan tenures, allowing for smaller monthly repayments. 

SJPP offers a wide range of business loan schemes that you can apply for as long as you’re a Malaysian citizen that owns at least 51% of a business. The Working Capital Guarantee Scheme has many scheme options for different purposes, such as working capital, export businesses, and automation and digital businesses. They also have schemes for startup companies, Bumiputera-owned, and women-owned businesses.

Malaysia offers a wide variety of government loans to its citizens, each with its own benefits and drawbacks. It is important for borrowers to understand the different types of loans available so that they can make an informed decision about which government loan in Malaysia is best for them. 

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