Money Management

The Ultimate, No-Guilt Guide to Paying Off Your Debt

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I don’t care how you got into debt. I don’t care what type of debt you have. This is a judgement-free zone. As long as you want to focus on paying off your debt, this guide is for you.

If you’re overwhelmed by your debts, then start from Step 1 all the way to Step 6. You’ll also find some bonus questions at the end of this article. Here we go. 

Step 1: List Out Everything You Owe

Before you can pay off your debt, you should know how much you owe, from who, and the interest rate. For example, you might list out:

  • Credit card from Bank A – RM5000 balance, 18% interest
  • Credit card from Bank B – RM3000 balance, 16% interest
  • Personal loan from Bank C – RM10000 balance, 8% interest
  • Personal loan from Ewallet D – RM4000 balance, 18% interest
  • And so on

For some of you, even this step is hard. It forces you to confront your debt problem head-on. Some of you might not even know the actual amount you owe – perhaps you’re scared to login your bank account, or procastinate opening the credit card statements. Do it anyway.

However, if somehow you still can’t bring yourself to do this step, then go to Step 6. Money avoidance can be tough to overcome.

Note: Notice that I didn’t put some types of debt in the list. Generally speaking, you don’t need to pay off your house loan (mortgage), car loan (hire purchase), ASB financing or BNPL early. Just follow the payment schedule is enough.

Done with your list of everything you owe? Good, now let’s proceed to…

Step 2: Rearrange your list from lowest to highest

There are two main strategies to debt repayment – snowball and avalance methods.

The Snowball Method

The snowball method means rearranging from the lowest to highest amount, and prioritise paying the lowest amount first. Using the same debt examples as above, this means rearranging the list like so:

  • Credit card from Bank B – RM3000 balance, 16% interest <— pay this one first
  • Personal loan from Ewallet D – RM4000 balance, 18% interest <— pay this one second
  • Credit card from Bank A – RM5000 balance, 18% interest <— pay this one third
  • Personal loan from Bank C – RM10000 balance, 8% interest <— pay this one last

The Avalanche Method

On the other hand, the avalanche method means rearranging from the highest to lowest interest rate, and prioritise paying the highest rates first. This means:

  • Credit card from Bank A – RM5000 balance, 18% interest <— pay this one first
  • Personal loan from Ewallet D – RM4000 balance, 18% interest <— pay this one second
  • Credit card from Bank B – RM3000 balance, 16% interest <— pay this one third
  • Personal loan from Bank C – RM10000 balance, 8% interest <— pay this one last

Which is better, the snowball or the avalance method? Both is fine. Mathematically, the avalance method is better – you’ll pay less interest overall. But whichever is fine.

Now you know which debt to pay off first. Let’s go on and proceed to

Step 3: Use your savings (if any) to pay off your high interest debt

If you have savings – whether in the bank, in ASB, in gold, whatever – keep enough for ~3 months worth of expenses and use the rest to pay off all of the high-interest debt using either Snowball or Avalanche method.

This step may sound obvious but I have actually received questions to the tune of:

Suraya, I have RM50,000 in ASB and RM5,000 in credit card debt. I’m making minimum payment currently. What else should I do to pay off the debt?

My answer: It’s not a bad idea to take out RM5k from ASB and use it to pay of the credit card debt. ASB’s returns are around 4-6%. Credit card interest is 16-18%. It doesn’t make sense to invest before you pay off your high-interest debt!

*this is also NOT the time to test high-risk investment! Do not invest so you have money to pay off debt – that strategy is at best misguided, at worst scam.

But let’s assume you DON’T have savings – how do you find the money to pay it off your debt, then?

Let’s go on to…

Step 4: Sell whatever you can sell

When you are in debt, your priority is to EARN money. Not investing, not anything else. EARN. And the fastest is to sell whatever you can sell.

Before you say ‘duh!!’, I’d like to share the story of Ariff Peter. The story is, he was RM1 million in debt but didn’t owe the money to banks or ahlong, but rather to people who lost money at an investment scam that he (naively) promoted.

However, instead of running away, he took responsibility over his life (and the people who trusted him). He liquidated all of his assets, allocated 90% of his salary towards his debt (even lived in his car!), and took on various odd jobs. Here’s a clip showing his story:

This story has a happy ending – As of Sept 2023, after years of sacrifices and hustling, Ariff Peter successfully paid off his debt. I have mad respect for people like him.

I’m NOT saying you have to live in your car, too, but…

You could sell stuff you already own on secondhand platforms like Carousell. Anything from clothes to electronics to books to collectibles, whatever

You could sell (rent) out a room or a parking space

You could sell services, whether on freelancing platforms or simply take on more overtime (if available)

You could sell your car and replace it with a cheaper-priced one from Carsome

You could sell your phone and replace it with a cheaper-priced one from Comp Asia

With luck, you could pay off a few, or even all of your debt with this step 🙂 If not, go on to Step 5.

Step 5: Pay off high-interest debt with low-interest debt

Disclaimer: Not everyone can (or should!) do this step. If you’re not eligible for the financial products needed for this strategy, then you have no choice but to skip this step.

The idea behind this is simple enough: Take on low-interest debt (0-6%) and use it to pay off the high-interest debt (8% and above). This goes without saying, but DO NOT take high-interest debt to pay off low-interest debt (or worse, to invest).

Here are all the low-interest* debt options:

*there is no set limit, but I consider low interest debt as 6% or less

  • Borrow money from friends/family – only take it if offered, don’t guilt trip them!
  • I mean it. Especially never take advantage of FAMA Bank. Don’t rob from their retirement funds.
  • Take balance transfer credit card – exact steps in a section below
  • Take cash advance from credit card – exact steps in a section below
  • Take low-interest personal loans – compare products from RinggitPlus Low Interest Loan page (you can also see some okay options in the Islamic personal loan section)

How to pay off debt using balance transfer credit card

Let’s say you charged RM15,000 on your credit card. You spent on travel, clothes, medical bills, a new set of tyres, whatever.

The best thing to do is to pay off the balance in full next month, but if you can’t do that, you could transfer the debt into a balance transfer credit card without incurring any extra interest.

Here’s how paying debt using balance transfer credit card works:

  • Find a balance transfer credit card. The best option is 0% instalment, typically available only in 6 or 12 instalments (months)
  • After (if) your application is successful, arrange to transfer the RM15k debt to the new card. The old card now have a RM0 balance
  • New card now has RM15k balance, to be paid in 6 or 12 instalments, depending on the bank

Therefore, instead of paying RM15k oneshot, you now pay:

  • Month 1: RM2500 (balance: RM12.5k)
  • Month 2: RM2500 (balance: RM10k)
  • Month 3: RM2500 (balance: RM7.5k)
  • Month 4: RM2500 (balance: RM5k)
  • Month 5: RM2500 (balance: RM2.5k)
  • Month 6: RM2500 (balance: RM0)
  • (As you can see, this strategy will only work if you have RM2.5k to pay towards the balance every month)

Note: there may be fees! But generally you will still pay less than the interest you would have paid on the original debt. Obviously, do not miss paying the instalments or you’ll be charged with a much higher rate.

Napkin Finance illustrates this well

You can find and apply for balance transfer credit cards here, or visit your bank.

How to pay off debt using cash advance from credit card

The method to paying off debt using cash advance from credit card is basically:

  • Apply for cash advance
  • Receive the money (typically straightaway appear in your bank account)
  • Use the money to pay off your outstanding debt
  • Pay the monthly instalment following the repayment schedule (usually auto-deducted from your bank account)

Many banks offer cash advance facility. However, as far as I know, only Maybank offers 0% cash advance facility through their Maybank EzyCash/-i product while the rest imposes x% fee.

Additionally and amazingly, Maybank is also running a 0% interest rate/management fee for 6 months and no fees and charges for all plans offer and waiving the one-time upfront fee until 31 December 2023.

In case this isn’t clear, I’ll be as blunt as possible – this is an amazing offer, take advantage of it. If you are eligible for this product, AND you can pay off the amount in full, you effectively pay ZERO interest for a 6-month loan. Something like this doesn’t come by very often.

Step 6: Reach out to professionals

If you have done, to the best to your ability, Steps 1 to 5 and it’s still not enough, you have to reach out to AKPK Debt Management Programme. They have assisted millions of people to restructure and potentially reduce their debt, and make repayment easier.

If you’re shy about seeking help, don’t. There’s nothing you have done that they haven’t seen. In all likelihood, your debt amount (the one you’re stressing out and losing sleep over) is not even the most problematic they have witnessed.

Upon enrolment, you’ll go through a multi-step process designed to get you back on track, financially speaking.

In case you’re still nervous to go for AKPK Debt Management Programme because you heard negative comments, you can read experiences by others in the thread below.

Oh, one more thing. This service is FREE. There is no such thing as agent, what more agent who ask you to pay first to enrol. Those are scammers at worst, opportunists at best. Apply yourself through AKPK Debt Management Programme.

And there you have it. I have compiled the step-by-step to get out of debt. If you can’t DIY, then please go for professional.

Getting out of debt is an achievement

It’s so scary how debt is so normalised these days. It’s so easy to get them! I’ve had telemarketers calling me offering loans. I’ve had credit cards mailed to me. Every other ecommerce store offer pay later services. Even e-wallets tempt you with personal loans nowadays!

As I mentioned in the Why We Can’t Stop Spending Money article, companies spent billions to devise new ways to get us to spend. Plus, shit happens – if you had to take that personal loan or max out your credit card due to an emergency, then you had to. Don’t beat yourself up too hard for being in debt, okay?

So, all the best in your debt-paying journey. I hope one day you’ll get yourself out of that hole. All the best.

Bonus Q: Should I pay off my PTPTN loan?

Paying off PTPTN loan only makes sense if you can get a loan repayment discount. The three discount categories are:

  • 10% discount on the remaining debt for full loan settlement;
  • 10% discount on payment of at least 50% of the debt balance in one payment; and
  • 15% discount on payment by salary deductions or scheduled direct debits <— If you can’t pay off your PTPTN loan in full or partially, then take this option. More info in PTPTN portal.

Bonus Q: How to pay PTPTN loan?

The easiest way to learn how to pay PTPTN loan is to download MyPTPTN app. All of your loan details will be there. You can also apply for the discounts from the myPTPTN app.

Bonus Q: I am a guarantor to [somebody’s] loan and they are not paying. Do I have to pay?

Unfortunately, yes. This is the reason why its generally not a good idea to be a loan guarantor for anyone, not even family members, spouse, or even children.

Some might ask, what are the consequences of not paying? Well… your credit score will suffer.

Bonus Q: How do I check if I have debt I don’t know about?

Sadly, sometimes fraud happens and people find themselves with debt they never took.

You can check your CCRIS record – the financing and repayment history of a borrower over the past 12 months – for free from, or from CCRIS kiosks at AKPK premises. Learn more about CCRIS here.

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