KUALA LUMPUR, March 16 — Banks in Malaysia will offer “goodwill discounts” to customers who choose to settle their existing hire-purchase loans early, starting from June 1.
The industry-wide initiative aims to ease the transition as major reforms to car financing rules, which abolish the controversial “Rule of 78” and flat rate calculation methods, are set to take effect.
In a joint statement, banking associations confirmed that the Hire-Purchase (Amendment) Act 2026 will be implemented on June 1, ushering in a more transparent financing system for consumers.
Under the new rules, the “Rule of 78” and flat interest rate structures for hire-purchase agreements will be abolished.
All new financing will shift to a reducing balance method using an Effective Interest Rate (EIR), making it easier for consumers to understand the true cost of their loans and compare products.
To assist existing customers, banks will provide goodwill discounts to individuals and small businesses with fixed-rate hire-purchase agreements who decide to settle their loans before maturity.
“With the goodwill discounts, customers who entered into hire-purchase agreements before the new rules and choose to settle their financing early will have an outstanding balance that is more comparable with what it would have been under the reducing balance method,” the statement explained.
The exact discount will be calculated by each bank based on the customer’s specific agreement and will be provided upon request for an early settlement quotation.
The initiative is supported by the Association of Banks in Malaysia (ABM), the Association of Islamic Banking and Financial Institutions Malaysia (AIBIM), and the Association of Development Finance Institutions of Malaysia (ADFIM).
A transition period will run from June 1, 2026, to March 31, 2027, to allow banks to upgrade their systems.
During this time, banks may still offer new financing under the old method, though some will be ready to offer the new reducing balance method.
Malay Mail – Malaysia
