A complete guide to debt consolidation in Malaysia

Malaysians owe a staggering amount of money, according to The Ministry of Finance. At the end of 2024, they published figures showing that household debt had reached RM1.63 trillion, roughly 84% of the country’s GDP.  

here’s another supporting research: According to a report from Taylor’s University, nearly three in four Malaysians between the ages of 18 and 40 are already in debt. 

Most of that debt are car loans, PTPTN, housing instalments, the ordinary cost of building a life. But layered on top of those are credit cards and buy now, pay later (BNPL) plans, and those are the ones that quietly get expensive. Credit card balances in Malaysia have climbed past RM40 billion. BNPL schemes have added close to RM1 billion more to that number. 

If you are reading this, you probably already know If you’re in the same boat, you probably already know what it feels like to have too many payments competing for the same paycheck. This article is about a way to fix that, and what becomes possible once you do. 

Why multiple debts are so costly 

The problem with having several debts at once is not just the total. It is the interest stacking on top of each other, at different rates, on different schedules. 

Credit cards are the most expensive. For example, a Standard Chartered credit card runs an interest rate from 15% to 18% a year. If you have paid your bill in full every month for the past year, you sit at the lower end. If you have missed a few, you are paying the maximum. 

BNPL schemes advertise zero interest (not all), which sounds great until you miss a payment. The late fees add up fast, and there is no cap the way credit cards have one. 

Then there is the mental cost. You are tracking four or five different due dates, four or five different minimum payments, and every month you are doing the same maths: Which one do I pay first this time? Did I pay that one already? This gets tiring really fast.  

The Ministry of Finance reported in 2024 that 53,000 Malaysians under the age of 30 owe a combined RM1.9 billion with personal loans, credit cards and BNPL as the main drivers. This means that a lot of young people are starting their adult lives in debt. But don’t worry, there’s one simple way you can get your debts under control: Debt consolidation. 

What debt consolidation is 

Debt consolidation is the simple act of taking out one loan to pay off several smaller ones. Instead of five payments to five lenders at five different rates, you have one payment, to one lender, at one rate. 

That’s all there is to it. It is not a trick. You still owe the same total amount. The difference is now you’re paying a smaller interest rate than what you used to, you can actually see the finish line. 

How it helps you to not pay more 

Let me walk you through an example. 

Say you owe RM30,000 across three credit cards at an average rate of 17%. You are making the minimum payment each month, which is about 5% of the balance. At that pace, it takes you more than five years to clear the debt, and you pay roughly RM15,000 in interest. That is half of what you originally owed, gone straight to the bank. 

Now say you take out a personal loan for RM30,000 at an effective rate of about 14%, spread over five years. Your monthly instalment is around RM700. Over the full five years, you pay about RM12,000 in interest. That is RM3,000 less, and you know exactly when the debt is gone. 

The savings come from two things. The personal loan rate is lower. And a personal loan has a fixed tenure, so there is an end date. Credit card minimum payments are structured to keep you paying for as long as possible. 

There is also a quieter benefit. One payment is easier to manage than five. You are less likely to miss a due date. You stop doing the monthly triage of which bill to pay first. That mental space is worth more than people expect. 

How to consolidate debt in Malaysia 

The most common way to consolidate debt in Malaysia is to take out a personal loan and use it to clear your existing debts in one go. 

Through GOfinance in the TNG eWallet app, you can access CashLoan, which lets you borrow from RM100 up to RM150,000, with tenures from one week to seven years. The application is fully digital. There are no processing fees, no paperwork, and often no early settlement penalties. Once approved, the money goes straight to your eWallet or bank account. 

Over 100,000 Malaysians have used CashLoan so far. Approval does not depend on a CCRIS check, which helps people who dont have a good credit profile to get financing. 

Here is how to do it: 

Step 1: List every debt you have. Write down the balance, the interest rate, and the minimum payment for each one. Include credit cards, BNPL, personal loans, everything. 

Step 2: Add them up. The total is what you need to borrow. Also add up your minimum payments so you know what you are currently spending each month. 

Step 3: Apply for the loan. Use CashLoan through GOfinance to apply for the total. Pick a tenure where the monthly instalment fits your repayment budget. Longer tenures mean smaller payments but more total interest. Shorter tenures mean higher payments, but you are done faster. 

Step 4: Pay everything off. Once the loan comes through, clear every debt on your list. Do not leave any open. The whole point is to simplify. 

Step 5: Do not borrow again. This is the step most people forget. You clear your credit cards and then, a month later, you swipe one for a dinner out. Within a few months you have the consolidation loan plus new credit card debt, and you are worse off than before. Consolidation only works once.

When it is not the right move 

Debt consolidation is useful, but it is not for everyone. 

If your total debt is small and you can clear it in a few months by cutting back, a loan adds cost you do not need. Interest is still interest, even on a short-term personal loan. 

If your spending habits have not changed, consolidation can make things worse. Some people clear their credit cards with a loan and immediately start running up new balances. Within a few months they have the loan plus fresh card debt, and they are deeper in the hole than before. 

If your income is not stable enough to cover the monthly instalment consistently, another loan adds risk. Missing payments on a consolidation loan damages your credit score just as much as missing a credit card payment. 

And if most of your debt is a housing loan or car loan at a low rate, moving it into a higher-rate personal loan costs you more. Consolidation works best when you are replacing high-interest unsecured debt like credit cards and BNPL. 

From clearing debt to building something 

If done right, this is what debt consolidation can lead to.

Financial independence is not about being rich. It is about having enough control over your money that your choices are driven by what you want, not by what you owe. And the first step is getting the debt under control. 

Think of it as three phases. The first is consolidation: you simplify, reduce your interest costs, and create a timeline. The second is acceleration: you look for ways to clear the loan faster, maybe by putting a bonus or some side income towards extra payments. The third is the shift. The money you were spending on debt now goes somewhere else. 

That third phase is where compounding starts working for you instead of against you. When you were paying 17% on credit cards, your money was compounding in the wrong direction. Once that debt is gone, the same RM800 a month can go into a money market fund like GO+ or SAVE, a unit trust from Principal, or an ASNB investment through GOfinance. At a hypothetical 5% annual return, after ten years you would have put in RM96,000 and your balance could be close to RM120,000. 

That is the same money. It is just working the other way. 

Mistakes people make when doing debt consolidation 

Looking at the monthly payment instead of the total cost. A lower instalment does not mean a better deal. If you stretch a three-year loan to seven years, the monthly figure drops but the total interest goes up. Always check the total cost of repayment. 

Using credit cards again after consolidating. This is the most common mistake. Consolidation clears the balances but does not close the accounts. If you start spending on those cards again, you are right back where you started. 

Not addressing the spending. Consolidation fixes the structure of your debt, not the behaviour that caused it. If the debt came from spending beyond your means, the loan buys you time but does not solve the problem. A budget matters just as much as the loan does. 

Picking a tenure that is too long. A longer tenure feels safe because the monthly payment is small. But you end up paying significantly more in interest. Choose the shortest tenure you can realistically afford. 

Skipping the fine print. Check for processing fees, early settlement penalties, and any other charges before you sign. CashLoan through GOfinance does not charge processing fees and often has no early settlement penalties, but it is always worth confirming. 

FAQs

What is debt consolidation and how does it work? 

Debt consolidation is taking out a single loan to pay off multiple smaller debts. You then make one monthly payment instead of several. It works best when the new loan has a lower interest rate than the debts it replaces, because that reduces your total interest cost over time. 

Is debt consolidation a good idea in Malaysia? 

It depends on your situation. If you have several high-interest debts like credit cards and BNPL balances, consolidating into a lower-rate personal loan can save you money and simplify your life. If your debts are small and you can clear them quickly, or if you are likely to run up new debts after consolidating, it might not be worth it. 

Can I use a personal loan to consolidate credit card debt? 

Yes, and this is one of the most common reasons Malaysians take out personal loans. Credit card interest rates run from 15% to 18% a year. A personal loan is typically cheaper, so replacing card debt with a loan reduces your interest cost and gives you a fixed end date. 

Will debt consolidation affect my credit score? 

Taking out a new loan creates a hard enquiry on your credit report, which may cause a small temporary dip. However, making consistent on-time payments on the consolidation loan will improve your score over time. Missing payments will hurt it. 

How do I apply for a debt consolidation loan in Malaysia? 

You can apply for a personal loan through GOfinance in the TNG eWallet app. CashLoan offers amounts from RM100 to RM150,000 with tenures from one week to seven years. The application is fully digital, there are no processing fees, and funds are disbursed to your eWallet or bank account.