Don't let banks cheat you of your hard earned money

The Association of Banks in Malaysia has announced that all banks will reduce loan installment payment. For many people who have no idea how the loan works, it sounds like a good news for them. For they will be paying less to the bank every month. And according to the association they are heeding the government request to help borrowers facing difficult economy times.

Sounds good right? Government wants to help its rakyat, banks want to help reduce the burdens of their customers, and the borrowers can save some money every month. Everyone is happy. The banks are so nice to help their customers in this difficult time.

Bullshit! Banks will never implement any move that will not benefit them. They only know how to milk the most money out of its customers. This latest move only serve one purpose. That is for banks to earn more money from the interests borrowers pay for their loans.

As we all know, Bank Negara Malaysia(BNM) has announced the reduction in Overnight Policy Rate a number of times since late last years. In total, they have dropped a total of 150basis points. From a high of 3.5%, it has now dropped to 2.0%. Following BNM move, the commercial banks has to reduce their Base Lending Rates (BLR) which will in turn reduces the interest earn from loans to borrowers.

In order to offset the lower interest earned, what they can do is to prolong the loan tenure. Which is exactly what they are doing now. Borrowers pay lower installments but over a longer term. Some may argue that its just a small difference, its insignificant. Fact is, it is NOT a small difference. You might be surprise to know that the difference can easily run up to 5 figures.

So for those who has outstanding loan with banks, please go inform your bank that you want to maintain your installment amount. Unless if you are getting laid off or getting a pay cut, you should be able to afford the same amount that you are currently paying. Inform the bank as soon as possible. This is because the banks are implementing this to ALL housing loan, just like how EPF is inplementing the contributions cut to everyone.

It is very unethical for banks to implement this to every loan but I guess ethics are a non existing word to the bankers. And the bad news is, not only is BNM doing nothing to stop them but they are backing them most of the time. BNM is supposed to regulate these banks and protect the people but they are doing opposites most of the time. Just like how the banks are charging for every single thing possible at outrageous rates, BNM just sit down and do nothing about it. Banks are after all blood sucking leech who only knows how to suck the most blood out of its victim.

Btw, if your never notice yet. When BNM announce reduction in Overnight Policy Rate, overnight, banks will instantly reduce their rates of fix deposit. However the BLR will take forever to be reduced and of course, at a rate lower than the reduction in OPR.