KUALA LUMPUR: The Finance Ministry and Bank Negara Malaysia have been urged to look into extending the maximum loan tenure to increase disposable income and prevent bankruptcy.

Congress of Unions of Employees in Public and Civil Services (Cuepacs) president Datuk Adnan Mat said borrowers would then have the option of having lower loan repayments as they deal with the impact of the Covid-19 pandemic and higher cost of living.

This included the maximum loan tenure of personal loans being extended from 10 to 20 years, which could translate to having higher disposable incomes, he said.

"Overall, this is expected to boost the economy and help people deal with pressures in life.

"More importantly, it gives a second chance to those who have been pushed into a corner to the point of having to file for bankruptcy and forcing themselves to restructure their finances.

"At the same time, the operations of credit cooperatives and financial institutions regulated by Bank Negara can grow again," he said in a statement today.

Adnan said Cuepacs took note of reports that the total number of bankruptcy cases handled by the Insolvency Department from 2018 to last year was 49,133, and that personal and vehicle loan debts were among the main reasons for Malaysians going bankrupt over the past five years.

He noted, however, that bankruptcy among civil servants, at 9.06 per cent or 4,449 cases, were not too worrying.

"This is because the exposure to good financial management that the public service has inculcated in its members has continuously increased awareness in managing finances so as not to get entangled in debt.

"However, Cuepacs is concerned about the needs of the people, who have to go into debt, to continue living due to insufficient wages to cover high cost of living."

These were reasons why many Malaysians were forced to take personal loans, he said, adding that higher repayments from the 10-year maximum loan tenure meant that their disposable income was greatly affected.

Extending the maximum tenure would also mean that those considering applying for home or business loans would not be unduly concerned about higher repayment amounts, he said.

"Those whose income has been affected will be able to restructure their loan terms and repayments to affordable amounts. The restructuring of loans will prevent bankruptcy," he said.

Adnan said in 2013, Bank Negara issued a circular shortening the periods of personal financing from 25 to 10 years and housing loans from 45 to 35 years, which resulted in higher monthly repayments. -Bernama

https://www.nst.com.my/news/nation/2023/02/876439/cuepacs-proposes-extending-maximum-loan-tenure-prevent-bankruptcies