Could debt consolidation be the answer?

A loan consolidation programme could allow borrowers to apply for their mortgage and settle their outstanding PTPTN debt

pic by BERNAMA

IF YOU have the courage to ask for a loan from others, you should have the honour to pay your creditors. Anyone with a good upbringing will tell you exactly that.

However, honour could be a little elusive to some, especially when the creditor happens to be someone close to you or, well, the government.

For some inexplicable reason, many of us seem to be more lackadaisical about the responsibility to honour our debts when it involves government agencies. Perhaps some of us are so used to the word “grant”, “subsidy” and “handouts”, which are often confused with government loans.

When Housing and Local Government (KPKT) Minister Zuraida Kamaruddin announced that defaulters of the National Higher Education Fund Corp’s (PTPTN) loans might be allowed to apply for mortgages — despite being on the Central Credit Reference Information System (CCRIS) — the more honourable quarters could not help but cry foul.

Many detractors find the proposal a little unfair and a tad ludicrous.

The argument is simple. If you can’t pay your outstanding loans, you do not deserve to apply for more.

In this case, if you can’t pay for something minor, a major undertaking like a house loan could be something that might pose a bigger trouble for you in the long run.

Zuraida said the proposal had also been approved by the Education Ministry, which would prevent other loan applications to be rejected based on CCRIS list.

She said the proposal, pending Bank Negara Malaysia’s approval, is expected to be enforced by October this year.

She said the move would also be beneficial, particularly to defaulters who are applying for loans to buy government-owned projects.

Now, what if there is another solution to this conundrum? What if the banks get creative and offer a win-win solution for all.

For instance, a loan consolidation programme could perhaps be initiated to allow borrowers to apply for their mortgage, settle their outstanding PTPTN debt, while scratching their names off the CCRIS list permanently.

It could work like one of those already available schemes that are offered by many banks, which allows you to combine all your outstanding balances — credit cards, mortgages and personal loans — into one account with fixed monthly repayment and paid to only one financial institution.

Since the outstanding PTPTN loan is pegged to the mortgage, its repayment period can also be stretched accordingly. That itself would lessen the monthly payment amount greatly and give the debtor breathing space.

At the end of the day, the financial institution would be able to maintain its loan portfolio at a healthy level.

A little far-fetched maybe? Well, flexibility in the banking business is certainly not a strange concept.

For instance, when the property market was suffering from a critical glut some 20 years ago, with buyers shunning purchases due to the apparent mismatch between their creditworthiness and the house prices, many banks formulated new schemes to attract borrowers.

Some lenders even did away with the minimum 10% down payment clause and offered home buyers 100% loan.

Certain lenders also stretched their offerings up to 110%, with the additional amount set aside for legal fees.

All the buyers needed to do were get their documents ready and send in their applications, knowing that half of the battle has already been won.

At the moment, Syarikat Perumahan Negara Bhd and 1Malaysia Civil Servants Housing Programme are among the projects housed under the KPKT umbrella and supervised by the National Affordable Housing Council that was set up last year.

Certain projects by Perbadanan PR1MA Malaysia have seen price cuts of up to 30%, which might just be what first-time house buyers are looking for.

As it is, the government’s decision to remove some 429,945 loan defaulters from the Immigration Department’s travel blacklist was reported to have led to losses worth billions to PTPTN.

Now, imagine if such a consolidation concept is introduced, everyone might just have a healthier and manageable balance. Don’t you think?

Zainal Alam Kadir is the executive editor of The Malaysian Reserve.