FIN 368 - Product and Service Report

FIN 368 - This paper is based on Credit Management System. The paper includes introdution and definition of Personal loans. When a bank or other financial institution lends money to an individual, it's known as a "personal loan." It's also known as a consumer loan. Table of content includes the advantages and disadvantages of the rpoduct, moratorium related to personal loans. It also includes advantages and disadvantages of moratorium to customers and many more topic.

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CAMPUS ALOR GAJAH MALACCA
CREDIT MANAGEMENT (FIN368)
INDIVIDUAL ASSIGNMENT
TOPIC: PRODUCT AND SERVICES REPORT
(PERSONAL LOAN)
PREPARED FOR:
MISS NORZAHIDAH BINTI YACOB
PREPARED BY:
NUREEN NASYIDA BINTI MOHD NASHROM
(2019886152)
CLASS OF MBA1195A
DATE OF SUBMISSION: 03 DECEMBER 2021

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ACKNOWLEDGEMENT
I'd like to thank Allah SWT and His messenger first. We owe it to the blessing
of Prophet Muhammad SAW, who has always directed us to follow the straight path.
With his grace, I can fulfil this unique task with vigour and dedication. So insha'Allah,
all the work spent looking for and researching ideas was worth it. In particular, I want
to thank those who have accompanied me on this journey.
So, I'd like to thank those who helped me complete my personal task. To my
parents who constantly prayed for me and spent time listening to my problems, I
express my sincere appreciation for their kindness and compassion. Otherwise, I
might be unable to finish this particular task. To finish this individual work, I would like
to thank Miss Norzahidah Binti Yacob, my credit management lecturer, for her valuable
help. Not to mention my buddies who helped me and shared suggestions. They also
helped and advised me a lot. Their small help means a lot.
Not only do I lack valuable words to thank everyone, but my heart is still full of
appreciation. On my part, I shall aim to employ finely honed talents and knowledge to
the Thank you for completing my personalised assignment. For information and ideas,
I had invested extra effort. I wish for my efforts to be worthwhile.

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TABLE OF CONTENT
NO. CONTENT PAGE
1.0 INTRODUCTION OF PRODUCT
1.1 DEFINITION OF PERSONAL LOAN 4
1.2 CHARACTERISTICS/FEATURES OF PRODUCT 5
1.3 ADVANTAGES OF THE PRODUCT 6
1.4 DISADVANTAGES OF THE PRODUCT 7
2.0 ISSUE RELATED TO THE PRODUCT AND
SERVICES SINCE 2020 AND 2021
2.1 MORATORIUM RELATED TO THE PERSONAL
LOANS SINCE 2020 AND 2021
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2.2 ADVANTAGES AND DISADVANTAGES OF
MORATORIUM TO THE CUSTOMERS
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2.3 IMPACT ON NEW CUSTOMERS AND EXISTING
CUSTOMERS
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2.4 DEMAND OF THE PRODUCT AND SERVICES
DURING COVID-19
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3.0 CONCLUSION AND RECOMMENDATION 11
4.0 REFERENCES 12
5.0 APPENDIX 13

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CHAPTER 1: INTRODUCTION OF PRODUCT
1.1 DEFINITION OF PERSONAL LOAN
When a bank or other financial institution lends money to an individual, it's known as
a "personal loan." It's also known as a consumer loan. Due to a variety of
circumstances, including unemployment, a lack of available funds for repayment, and
the accumulation of excessive interest, taking out a personal loan became necessary.
Taking out a personal loan is considerably different than taking out a credit card. A
personal loan delivers a single, significant sum of money to its debtors. Over the
course of the loan's term, borrowers are expected to make regular monthly payments
to cover both the principal and interest.
Personal loans can be secured or unsecured. A loan might be secured by a property
like a house or a car. Assets are put to use in this way. A high-risk unsecured loan is
one that doesn't require a security and is therefore characterised as interest risk.

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1.2 CHARACTERISTICS OF PERSONAL LOAN
It's important to note that personal loans come in a wide range of sizes and
types of borrowers and lenders. There will be a stated due date in the loan agreement
for each monthly payment.
Expenses such as legal and filing fees are also included in the interest charged
on personal loans. If the bank is satisfied with the borrower's credit and repayment
capacity, personal loans require little documentation and are disbursed immediately.
Due payments must continue to be made even if there is a dispute between the
borrower and bank, the agreement states. Any necessary legal action would be filed
in accordance with the agreement's provisions. When a borrower breaches the terms
of a loan agreement, the bank has the right to take legal action against them.

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1.3 ADVANTAGES OF PERSONAL LOANS
a. Minimal documentation is required
Simple online or offline personal loans with minimal documentation. The
required documents include proof of income, address, and identity.
b. A simple and fast procedure
Personal loans require no collateral or guarantee and can be processed quickly.
c. No Security Required
Personal loans require no collateral to apply. Personal loans are granted based
on income, credit score, and repayment history.
d. Many Uses
Loans for personal use can be utilised for a variety of reasons, including paying
off debts, coping with an unexpected expense, and a host of other purposes.
e. Flexible Tenure
A typical personal loan period is between 12 and 60 months.

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1.4 DISADVANTAGES OF PERSONAL LOANS
a. Credit Damage
Having a solid credit history is quite crucial when consumers apply for loans.
When a loan is late or not paid, the lender will let the borrower know. This will
result in worse credit scores for those borrowers who have not paid back their
loans.
b. Lender’s Risk
Personal loans have a high level of risk because there is no security to secure
the transaction.
c. Fees and panalties
Lenders will collect application and origination fees from borrowers. Paying for
the services rendered is a must. Borrowers can also face penalties if they miss
a payment or fail to make one at all.
d. Strict Qualification Criteria
When a borrower has no collateral to secure the loan, the standards vary from
bank to bank; nonetheless, the lender follows tight guidelines in this scenario,
and the loan will be processed without delay provided the borrower meets the
bank's criteria.

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2.0 ISSUE RELATED TO COVID-19 PANDEMIC
2.1 MORATORIUM RELATED TO THE PERSONAL LOANS SINCE 2020 AND
2021
A moratorium could be defined as a temporary halt to an associated operation
or rule until it is overturned by future consideration. A moratorium may be imposed by
government authorities or by a firm as a matter of course. It is almost always required
in the event of a brief financial crisis. Associated operations such as debt collection
may also be subject to a moratorium in judicial procedures during economic condition
proceedings.
Following the announcement of a six-month moratorium on loans, which will
begin in April, the Malaysian government issued an MCO, or Movement Control Order,
to assist businesses and people affected by Covid-19. It is expected that nearly 3
million people and small and medium-sized businesses will benefit from the
government's call (SMEs).
According to Tan Sri Muhyiddin, depending on the borrower's situation, different
types of assistance are provided, including solely procuring interest for a set amount,
extending the amount of the loan to reduce the monthly instalment, or deferring the
repayment of the loan until the receiver becomes more financially stable. The loan
moratorium is managed in a technical fashion. When it comes to choosing, the receiver
is in complete control if that is what they require. It's also important to note that
moratoriums apply to any and all types of loans, with the exception of credit card debt
and loans or funding that are more than ninety days past due as of April 1, 2020.
On January 12, the ruling di-Pertuan Agong announced a state of emergency
throughout the country. Following the declaration, on 13 January, the MCO was
reinstated for a few states, including Melaka, Selangor, Penang, Johor, and Sabah,
and the Malaysian Central Bank declared that the borrower or loan taker will request
a repayment moratorium, and that it will have no effect on the borrower's central credit
reference information (CCRIS).

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2.2 ADVANTAGES OF MORATORIUM TO THE CUSTOMER
The immediate relief from interest payments provided by a moratorium helps
the borrower overcome a liquidity issue. Borrowers who have been affected by the
COVID-19 pandemic have been relieved of financial burden through moratoriums. If
the bank has granted a 6-month moratorium term, an individual can better arrange
their repayment during this time. Finally, even though the borrower is not making the
monthly payment, the moratorium has no impact on the borrowers credit score. Also,
there will be no panalty fees.
2.3 DISADVANTAGES OF MORATORIUM TO THE CUSTOMER
Interest is not waived, and clients are required to pay their monthly instalments
later as a result of a moratorium, which are the most significant disadvantages.
However, despite the fact that six months' worth of monthly instalments have been
postponed, the total amount of interest will continue to rise, causing an increase in the
amount of money owed each month. Once the moratorium period has expired, debtors
will be faced with an unanticipated burden that they will have to deal with. For the next
six months, it appears that the borrower will not be compelled to make monthly
payments toward the loan balance. This will be felt later when the borrower is
compelled to pay the interest for six months in one month, resulting in an unexpected
shock to the individual's financial circumstances.

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2.4 IMPACT ON NEW CUSTOMERS AND EXISTING CUSTOMERS
It is undeniable that COVID-19 has impacted global markets. That it happened
at all has surprised many people, including companies. Due to the decline in demand
for travel, industries such as global aviation are being forced to scale back. The
economy has been hit hard by the closure of non-essential companies like real estate
and construction. The monthly payments of many firms are now in jeopardy Loans and
mortgages will be suspended for six months by Bank Negara Malaysia. Many
individuals and businesses will likely struggle despite lender relief. That the domino
effect on the end value chain, namely households, is significant must be recognised.
2.5 DEMAND OF THE PRODUCT AND SERVICES DURING COVID-19
Given that more than half of Malaysians are out of work as a result of the
pandemic, many people are scrambling to keep up with their obligations until their next
paycheck is deposited into their account. During this outbreak, the Malaysian Central
Bank anticipates that the use of personal loans will increase, notably for everyday
expenses and for individuals working in the commercial sector, particularly in the short
term. A brief increase is anticipated in the near future. However, Malaysian banks, on
the other hand, are in a good position to absorb the negative impact on profitability.
The covid-19 outbreak caused many people to anticipate borrowing money from
relatives, friends, banks or other financial organisations in order to cover their
expenses. In order to verify that the applicant has a strong credit history and a
consistent source of income, the bank will scrutinise each and every personal loan
application submitted. Income does not have to be in the form of money; it can also
take the shape of a retirement pension. The financial expert Jaret Weitz believes that
taking out loans during this pandemic epidemic is a wise financial decision.

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3.0 CONCLUSION AND RECOMMENDATION
The pandemic outbreak has shown that loans have been tremendously useful
to individuals. A terrific choice, but one that comes with a big disadvantage for the
applicant, is to apply for a personal loan during the Covid-19 outbreak. Even so, not
every application will be approved; some may be turned down. Applicants should
expect this. When a bank approves a loan, it can have a considerable impact on the
economy for the time it takes to repay it. Instead of keeping their money, borrowers
will be forced to spend it on needs, which will hinder economic growth throughout the
pandemic. Additionally, it helps the borrower cope better with the financial difficulties
that plagued many of us during this pandemic. To help individuals in need even further,
the government announced an automatic six-month moratorium that would expire in
October 2020. Loan moratoriums, as can be seen from the above, have both
advantages and downsides, so people contemplating them should carefully review the
preceding points before making a decision.

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REFERENCES
Dawn Chan. (28 June 2021). 6-Months Bank Loan Moratorium For Individuals,
Micro Entrepreneurs, Kuala Lumpur: New Straits Times (NST)
https://www.google.com.my/amp/s/www.nst.com.my/amp/news/nation/2021/0
6/703091/6-month-bank-loan-moratorium-individuals-micro-entrepreneurs
Bernama. (3 April 2020). COVID-19: Jumlah pinjaman perlu disusun, dijadualkan
semula meningkat – BankNegara: Berita Harian
https://www.bharian.com.my/bisnes/lain-lain/2020/04/672426/covid-19-
jumlah-pinjaman-perlu-disusun-dijadualkan-semula-meningkat
Bank Negara Malaysia. (6 July 2021). Six-month moratorium for all individuals,
micro enterprises and affected SMEs begins 7 July 2021: Bank Negara Malaysia
(BNM)
https://www.bnm.gov.my/-/six-mth-mora-begins-20210707
Ida Lim. (14 July 2021). Malaysia’s new six-month loan ‘moratorium’: All you need
to know before you say ‘yes’, Kuala Lumpur: Yahoo News
https://www.google.com.my/amp/s/malaysia.news.yahoo.com/amphtml/malay
sia-six-month-loan-moratorium-205915068.html
CIMB. (12 Jun 2020). WHAT WILL HAPPEN TO YOUR LOAN AFTER THE 6-
MONTH MORATORIUM IS OVER? : CIMB
https://www.cimb.com.my/en/personal/life-goals/covid-19/what-will-happen-to-
your-loan-after-the-6-month-moratorium-is-over.html

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APPENDIX