Malaysian banks are now giving borrowers a chance to save if they repay their car loans ahead of schedule. This comes after the passage of the new Hire‑Purchase (Amendment) Act 2025 (HPAA), which reforms how hire-purchase financing is calculated. The Star+2Association of Banks in Malaysia+2
🚗 What’s Changing & Why It Matters
- The banking industry — represented by Association of Banks in Malaysia (ABM), Association of Islamic Banking and Financial Institutions Malaysia (AIBIM), and Association of Development Finance Institutions of Malaysia (ADFIM) — announced a “goodwill discount” for early settlement of existing fixed-rate hire-purchase loans. The Star+1
- This discount applies to old agreements that used the outdated “flat rate” or “Rule of 78” interest-calculation methods. The Star+1
- Under the new law, all new hire-purchase loans will use a fairer “reducing-balance” method, where interest is charged only on the outstanding balance — cheaper and more transparent. NST Online+1
The move aims to protect borrowers who signed old-style loan agreements — giving them a chance to benefit from the newer, fairer method if they settle early.
✅ Who Can Get the Discount
Borrowers are eligible for the goodwill discount if:
- Their loan is a fixed-rate hire-purchase agreement under the old system (flat-rate or Rule of 78). Malay Mail+1
- They choose to pay off the loan before its original maturity date. The Star+1
- Their loan account is in good standing (no serious arrears or legal action). Malay Mail+1
Once the discount programme kicks in (expected in the first quarter of 2026), borrowers can approach their bank to apply for early-settlement and check how much discount applies. The Star+1
📅 When This Will Happen
- The discount scheme starts in tandem with the effective date of the Hire-Purchase Amendment Act — expected in early 2026. The Star+1
- The offer remains valid for as long as there are outstanding old-style loans under the old calculation system. CIMB Malaysia+1
Banks have emphasized transparency and support — they want borrowers to feel fairly treated as the finance industry transitions to the new law. Association of Banks in Malaysia+1
💡 What This Means for Borrowers
- If you have an older car loan under the old system, settling early might now save you money thanks to the discount.
- The new reducing-balance system promised under HPAA can also lower interest burden for future loans.
- Borrowers should check with their bank once the law is live, to confirm eligibility and see how much they can save.
Thinking about getting a car loan or planning to settle early? Let Leap Concept guide you with a clear eligibility check and personalised financial assessment. Chat with us to understand your options better — it’s free and hassle-free.
