I was 25 years old. And I knew it was time to go. I had already worked two years for the national oil company, PETRONAS but I knew my future wasn’t there.
There was a problem though — if I quit, I would have to pay back a large sum of money. After all, they had sponsored my education for five years from 2002 – 2006.
The contract required me to work two years for every year of sponsorship. So I had a ten-year employment bond. Having served only two years, I would have to pay back 80% of the sponsored amount.
I was scared. I had no money. But then I prayed — and somehow found faith that God would help me find a way to pay. So I quit.
During the exit process, I had to stop by the Education Sponsorship department in the iconic twin towers. The smiley lady looked my name up on the computer and pressed a button. “OK you’re a scholar,” she said, “That’s all.”
“And the payment?” I asked nervously. I was fully expecting her to issue me a letter of payment immediately. And half-expecting her to call security if I couldn’t pay.
“Finance will contact you for that.”
I walked out a free man.
It would be another five years before I heard back.
The Letter and the Offer
The payment letter finally arrived in March 2014. It was via a debt collection company, called Maysky. The total amount PETRONAS had spent on me was RM 72,329.50 ($ 20,665).
Considering the two years I worked with the company, the prorated amount was: RM 58,002.31 ($ 16,572).
Thankfully, the letter also came with an attractive only-in-Malaysia discount. Pay in a lump sum within the allocated time frame, and they’d give me 40* percent off.
I had three months.
Lump Sum Payment or Monthly Payments?
At first, I briefly considered not taking the lump sum payment discount. The other option allows you to spread the payment out, but you have to pay the full amount. The length of time depends on how much you owe. When I called Maysky to discuss, they told me I could stretch my payment up to 7 years.
(And just because I’m a nice guy, I just called them to ask how long the interest free repayment period is for other amounts):
RM 10,000 – 30,000: 4 Years
RM 30,000 – 55,000: 7 Years
RM 55,000 – 100,000: 10 Years
I was hoping for one of those super-long repayment periods, like 35-40 years. 7 years didn’t sound appealing. And it didn’t make any financial sense. Taking the 40% discount was the right thing to do.
Now I just had to find a way to raise RM 34,800 ($ 9,942) in less than twelve weeks.
Where to Find RM 34,800?
In anticipation of this day, I had been saving money for the past five years. But I hadn’t saved enough. There was about 10K cash I could easily withdraw. But if I needed the whole amount, I would have to sell all my liquid assets. Not something I wanted to do.
So I started to think of other options:
- Borrow from my parents — Didn’t like this option because my huge ego doesn’t let me borrow money from my parents.
- Borrow money from other people — Better than above. I would have been willing to pay interest. But I don’t like paying interest either.
- Withdraw from my retirement fund (EPF) — This was a promising one, until someone told me EPF does not allow withdrawal for “breach of contracts”, which is what I did when I resigned.
- Borrow money from the Government a.k.a. PTPTN loan — But after reading their website, I found out you can’t use the PTPTN to pay a debt like mine. You have to still be in university.
- Borrow money from the bank — The final solution, but banks charge high interest. Most personal loans in the market charge at least a 10% effective interest rate.
But I thought — Hey! Surely there’s an exception for people like me, who are struggling to pay their education debts. There must be some kind of low-interest loan to help. So I continued to search. A few education loans from local banks popped up — but again, these are funds to pay for your fees while you’re still in university.
I finally found redemption — but from an unlikely source.
The Unlikely Savior: Credit Cards
Here’s something that’s always bothered me: in the personal finance world, many experts treat credit cards like scum.
I beg to differ though. I think credit cards offer wonderful privileges — often for free — but only if you’re disciplined enough and know what you’re doing.
I can’t recall exactly when I got the idea of using credit cards to pay off my education loan. It was probably a combination of reading Mr. GenXGenYGenZ‘s blog and my hobby: collecting credit card points. Initially I was just thinking of all the points I would get if I paid with a credit card.
This wouldn’t have solved my problem though. If I swiped 34.8K, I would still have to pay this amount the next month. Just that I’d be paying the bank — instead of the debt collectors.
And then I realized — Hey, why don’t I do a balance transfer? Transfer the balance to another credit card, and pay the balance over a longer period of time: like 6 months or 1 year.
So I looked in the market for balance transfer promotions. There were a few good ones, but I found one that had absolutely zero charges:
Now that I had a plan, I called up Maysky to verify that they would accept credit card payments. They did. (And due to my love affair with American Express, I also asked if they accept AMEX. Unfortunately they don’t — just Visa and MasterCard).
Paying the Accelerated Repayment Scheme (ARS)
On 1st April 2014, I submitted the paperwork — confirming that I accepted the 40% discount, and that I would pay the full amount by 11th June.
Meanwhile, I called up Maybank to ask them to extend the credit limit on my MasterCard. After a few questions, they gladly agreed to. And then I went to the nearest RHB branch to apply for an RHB credit card. It took about two weeks for the new credit card to arrive. And now, I was finally ready.
One afternoon in the middle of May, I submitted my credit card details to Maysky. Within a few hours, I got the notification SMS on my phone — the transaction was done. Now it was time for Phase 2 of my plan.
Applying for a balance transfer plan is surprisingly easy. All you need to do is fill up a simple form and submit a copy of your credit card statement. Once I had emailed my documents — it took just a few working days — then RHB notified me that my balance transfer was successful. I checked my Maybank MasterCard balance online, and indeed like magic — it was gone!
I was happy. My plan was working. My 34.8K lump sum debt had now become 6 months of 5.8K instead.
A Surprise Twist
I had planned all the payments out in a spreadsheet. The RM 5,800 a month hurt — it would burn through my emergency cash reserves rapidly — but the 6-month period would make it possible. I would scrape through without having to liquidate any other assets.
But after three months, in September 2014, another promotion came out — this time from Maybank: a 12-month balance transfer which also had zero percent interest. And waived all other charges. I’m not sure if it was divine intervention, or just capitalism — but another idea hatched in my mind.
Could I transfer my outstanding debt back to Maybank and pay the balance over 12 months, interest free instead?
I wasn’t sure. It felt like cheating the system. Transferring the balance from one bank to another, and then transferring it back — getting extensions without any charges. So I called both banks to confirm. But they assured me it was fine.
So I did it — I transferred the remaining (3-months) amount onto another 12-month payment plan. In effect, I had converted a lump sum debt into a 15-month interest free loan.
And my monthly payment was now a very much more manageable RM 1.45K.
Could It Work For You?
It worked for me — but I realize the steps above probably won’t work for everyone. Here are a few factors to consider, if you’re even thinking about it.
- Credit limit: You can only swipe as much as your credit limit allows. But if you don’t have enough credit, you can always get around it by asking the bank to temporarily increase your credit limit. Or perhaps split the amount over two or three credit cards.
- Risk: Guess what happens if you miss a payment or pay late? You get hit with the huge 18% interest, and late payment charges. No kidding — there’s significant risk involved here — it’ll only work if you have discipline. If you’re the type that can’t control credit card usage, it’s definitely not for you.
- Timing: Zero percent interest balance transfers don’t happen all the time. In a worst case scenario, you might need to pay a bit of interest (1-3%). However, the market is very competitive and banks are always trying to outdo each other. When I was searching for my balance transfer, I always had 2-3 different banks to look at. Where to find latest updates on balance transfers? Try iMoney.
In summary, here’s how I paid off my education loan:
- Reduced debt from 58K to 34.8K (40% discount) by agreeing to pay a lump sum.
- Paid 34.8K on my Maybank MasterCard.
- Transferred that 34.8K balance onto a 6-month interest-free payment plan on my RHB MasterCard.
- Paid 3 installments of 5.8K (Ouch!)
- Transferred the remaining 17.4K onto a 12-month interest-free payment plan on my Maybank Visa.
- I’m still paying that 1.45K every month till the loan amount finishes this year.
The only charges I paid were the RM 50 service tax (each) for the two credit cards I used.
And the benefits? 34,800 points (worth an equivalent of RM139.2) for me, two very happy banks, a very happy debt collection company, and peace of mind knowing that I’ve settled my education debt. Thank you PETRONAS. I’ll be forever grateful.
I’ll make the last payment for my education loan this September. In retrospect, quitting was one of the best things I ever did. I’m glad the money issue didn’t stop me from making a career choice I really wanted. It worked out in the end.
If you’re ever in a situation where you need money to pay off your education loan, just know that there’s help. You don’t have to be scared like how I was. Search, ask for it, and you’ll find sources who can help. There’s the banks. There’s plenty of personal finance websites now. There’s mr-stingy.
And you can always pray.
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A truncated version of this article first appeared at iMoney.
Update April 2017: You can now even pay PTPTN loans using credit cards.
In initial versions of this article, I wrongly wrote “30% discount” when it’s actually a 40% discount. 58K to 34.8K is a 40% discount. Sorry for my poor math.
Pic Credit: “Graduation 07” by David Joyce
