Cuepacs proposes extending maximum loan tenure to prevent bankruptcies

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 includes the maximum loan tenure of personal loans being extended from 10 to 20 years, which could translate to having higher disposal 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 pushed to a corner to the point of having to go through 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 takes note of reports that the total number of bankruptcy cases handled by the Insolvency Department from 2018 until 2022 was 49,133 cases, and that personal and vehicle loan debt were among the main reasons for Malaysians going bankrupt over the past five years.

He noted, however, that bankruptcy cases among civil servants, at 9.06 percent or 4,449 people, 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 at the moment who have to go into debt to continue living due to insufficient wages to cover high living costs," he said.

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

Extending the maximum tenure would also mean those intending to apply for housing or business loans will not be unduly worried over higher repayment amounts, he said.

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

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