Hire pur­chase the top rea­son for bank­ruptcy

The Sun (Malaysia) - - SUNBIZ - BY EE ANN NEE

PETALING JAYA: Con­trary to what peo­ple may think, the top rea­son for bank­ruptcy in the coun­try is most of­ten caused by car loans, or hire pur­chase, given that a car is a de­pre­ci­at­ing as­set, said Credit Coun­selling and Debt Man­age­ment Agency (AKPK) fi­nan­cial ed­u­ca­tion man­ager Nir­mala Supra­ma­niam ( pix).

She said the mis­take that most peo­ple make is cal­cu­lat­ing one’s in­come and look­ing at how much one can af­ford based on the monthly car in­stal­ment.

“But own­ing a car is more than that and we fail to cal­cu­late the petrol, park­ing, main­te­nance, ser­vice, road tax and in­sur­ance. Prob­a­bly a car that I’m pay­ing RM700 a month for, I should have RM1,400 al­lo­cated for it to in­clude other expenses,” Nir­mala ex­plained to Sun­Biz re­cently.

She said most peo­ple do not have a prob­lem pay­ing the in­stal­ments but find it dif­fi­cult to main­tain the car. Even­tu­ally these peo­ple will de­fault as they have cre­ated loans to main­tain the car and when they do not have enough to pay, the car will be put up for auc­tion.

“It’s a de­pre­ci­at­ing as­set and when auc­tioned off, one still needs to pay the bal­ance. You can be de­clared a bank­rupt when your loan bal­ance is above RM30,000. When you look at a house, it’s a big­ger amount but it’s an ap­pre­ci­at­ing as­set. If the prop­erty is auc­tioned there would be ex­tra to set­tle the pay­ment.” Nir­mala said the fi­nan­cial lit­er­acy level among Malaysians is still not up to par and ed­u­ca­tion is needed, es­pe­cially on loans and the things that peo­ple pur­chase, as well as the con­di­tions and con­se­quences to it.

“Con­sumer em­pow­er­ment is needed. For ex­am­ple, as a guar­an­tor, you need to know your rights. Some­times peo­ple just sign the pa­pers and they don’t know the obli­ga­tions.”

She said in­sol­vency sta­tis­tics showed that those who are bank­rupt are mostly 35-44 years old.

“But when you look at the real rea­son, it’s be­cause when they were younger, they did not plan and were think­ing of en­joy­ing first.”

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