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  • Topic: Payback period, Debt, Interest
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  • Published : February 12, 2011
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For those who took a PTPTN study loan before 2008, you have probably heard of the PTPTN offer to change the 3% service charge for existing loans  to the 1% Ujrah payback scheme. But before you register to convert to the Ujrah Payment method at PTPTN’s website, take some time to read what I have to say here. Ujrah basically means “Upah” or pay in English. A more familiar term is “service charge”, so PTPTN is just re-naming the loan payment scheme to seem more Islamic. But I guess that is the idea.

To convert the loan payment scheme to a more Islamic method.

However, the conversion to ujrah method  of payment only applies to those who have not finished payment by 2008. But for those eligible, what does this ujrah payment mean to you? Refer to the table below taken from the Pekeliling Bilangan 2 2008 of the PTPTN:

I guess the Table is self explanatory. It basically shows how much you save by opting for the Ujrah payback method. How and  what is the formula they use to count the payment? Very simple,
For example, RM5000 borrowed for a period of 5 years using the Ujrah method : RM5000 x 1% x 5 = RM250  of total Ujrah to be paid to PTPTN or RM50 of service charge per year to be paid to PTPTN, meaning you need to pay RM1050  per year. This is the fixed amount that has to be paid each year, whether or not you settle the payment early. Settling it later than the scheduled payment date and a compensation (penalty) will be charged. As for the 3% baki berkurangan method (as you already know) it basically depends on how much of the loan you have left at the end of the year, 3% will be added to that amount each year. The faster you settle the loan the less you pay. The longer it takes you to pay, the more you have to pay. Spoken like a true “along”.

But as the table shows above, if you payback according to the timeline given by PTPTN you end up paying more that if you pay using Ujrah. more info on how the payback is calculated, please refer to the Pekeliling Bilangan 2 2008 of the PTPTN. Bottom line

Whoa….not so fast, while it shows that the 1% ujrah method shows a smaller number of service charge to be paid to PTPTN, if you are disciplined enough you can save more if you settle the loan earlier than scheduled. But it will be bad if you are not disciplined enough to even pay on time. This 3 % baki berkurangan method is an example of the “riba” the Islamic banking is trying to avoid so much. But it’s not the 3% that its against, it the uncertainty of how much of service charge that has to be paid is the problem. But having said that, personally, I would rather stick to the 3% baki berkurangan method as it gives a reason to pay back the loan as quickly as possible and as my uncle would say, the most Islamic thing to do is to pay your debts as soon as possible, because you don’t know when you will die. It’s not over yet

For those thinking of changing to the 1% you might want to consider reading the terms and conditions stated in the form here : Read the terms and condition stated below the part that you are supposed to fill in. For those lazy to read it, here are some terms that you have to consider : * you will have to pay through salary deduction via LHDN, so there is no running away. * you will have to inform PTPTN 3 months in advance if you are going abroad during the paymend period * you will still be charged a 1% penalty if you don’t pay on time. * And this is the best part  “23. Walau apa pun yang tersebut diatas, PERBADANAN berhak pada bila-bila masa menurut budi bicara mutlaknya meminda atau menambah terma-terma atau syarat-syarat yang terkandung di dalam PERJANJIAN PEMBIAYAAN PENDIDIKAN.” The real Bottomline.

For guys like me, a freelance web-designer, it’s pretty hard to say how much I can afford to pay a month simply because there are ups and downs in business. But honestly I don’t want to convert to Ujrah simply because of the condescending terms...
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