Cuepacs proposes extending maximum loan tenure to prevent bankruptcies

KUALA LUMPUR: The Finance Ministry and Bank Negara 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 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 yesterday. 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 per cent 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.