Debt management: It's okay to borrow, but be moderate

Sinar previously reported about a trend among Malaysians who prefer renting homes rather than buying properties through loans from financial institutions.

The price of properties in the country has increased between 10 to 20 per cent each year and the financial incapability of individuals to buy a house was a significant factor leading to many people over the age of 40 being unable to afford to own a home.

Among the factors contributing to the inability of this group to buy a house was their inclination to accumulate debts early on through personal loans, credit cards and monthly installment plans for purchases.

As a result, they faced difficulties meeting the minimum qualifying criteria to apply for housing loans from financial institutions.

However, does this mean that we cannot have debts before buying a house?

Buying a house is not easy; it requires a high deposit that would certainly take years to accumulate funds.

What about a car? Can we not take out a car loan before buying a house?

Certainly, there are various answers. Both are equally important, and there is no correct answer to this question; it depends on individual needs.

Some argued that a house was more crucial because they can ride a motorcycle and their home is close to their workplace and public transportation.

But for women who are not skilled at riding motorcycles or needed to change public transportation two or three times to get to work, a car is undoubtedly more necessary to commute to and from work.

What often caused problems was not buying a car before a house but buying a car which was worth more than they could afford.

It is enough to buy a car priced below RM50,000 and the monthly installment should not exceed RM500.

With this, we are sure to have sufficient savings for the down payment while meeting the minimum qualifying criteria for a housing loan.

At the same time, do not accumulate debts for non-essential items such as expensive branded mobile phones.

If we borrow moderately only for essential items, we can afford to buy a house within five or 10 years after getting a job.