The Malaysian government has announced a three-month extension to the loan repayment moratorium for individuals who have lost their jobs and yet to find new employment during the Covid-19 pandemic – the Targeted Repayment Assistance (“TRA”) Programme. This programme is to assist those who face difficulties in continuing their debts during the Covid-19 pandemic. But a loan is a loan. Sooner or later it needs to be paid. Otherwise the creditworthiness of the individual can be compromised.

 What is Creditworthiness?

  • Creditworthiness is what the lender will determine whether an individual is eligible for acquiring a loan before the lender approve any new borrowings to the individual.
  • Creditworthiness plays an important role in having the required loan applications approved.
  • Creditworthiness is a measure of how well an individual manages their debts.

Two (2) Distinct Strategies to Settle Outstanding Balances

  • Debt Avalanche method
  • Debt Snowball method

 Debt Avalanche method

  • Prioritizing debts with the highest interest rates.
  • Paying off debt starting from highest rate to lowest interest rate, regardless of balance.
  • Debt avalanche method involves making minimum payments on all debt, then using any extra funds to pay off the debt with the highest interest rate.


  • For individuals with larger amounts of debt, the avalanche method can reduce the time it takes to pay off the debt.
  • End up paying less money overall – provided the individual stick with the payment plan as the individual do not skip a month or two of strategic repayments.


  • This method requires discipline and commitment to pull off.
  • Also, it requires constant amount of discretionary income.

 Debt Snowball method

  • Prioritizing smallest debt.
  • Paying off debts from smallest balance to largest balance, regardless of interest rates.
  • The debt snowball method involves making minimum payments in all debt, then paying off the smallest debts first before moving on to next smallest.


  • Builds motivation by settling debts fast.
  • Forces the individual to stay intentional about paying one bill at a time until the individual is debt-free.


  • End up incur more interest.
  • More expensive overall.
  • Can take longer time to become completely debt-free.

Consequences for Late Loan Repayment

  • The credit score of the individual will be affected.
  • The individual will be charged penalties.
  • The individual may be filed for bankruptcy by failure to pay off a loan timely.


  • If you are unable to tackle your debts by yourself, do seek help from recognised agencies that can help you come up with a debt management plan.
  • Make sure you go to a reputable organisation and not some unauthorised agent that claims to represent financial institutions.
  • The Credit Counselling and Management Agency or AKPK offers free advice and guidance to borrowers including options for debt restructuring.
  • There are other agencies, including Creador Foundation, which provides financial literacy education for low and middle income adults via Multiply.
  • Whatever your financial situation may be, take time to review it and safeguard your creditworthiness.
  • Prioritize your essentials and do not let your bill grow faster than you can pay them.

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