PETALING JAYA: Malaysia’s banks have announced goodwill discounts to borrowers who choose to settle their existing fixed-rate hire-purchase loans early, following Dewan Negara’s approval of the Hire-Purchase (Amendment) (HPA) Bill.
In a joint statement, 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) said the discounts would be offered to borrowers at the point of early settlement for all existing fixed-rate hire-purchase agreements.
This will include those calculated using the Rule of 78 method (which resulted in a large portion of the interest included at the start of the loan), with the rule itself and flat rates to be abolished for all new customers as well.
“This will ensure fairness for customers who entered into agreements prior to the HPA or during the permitted grace period.
“This provides affected customers with treatment comparable to that of new customers under the HPA when they choose to settle their hire-purchase financing early.
“Our priority is to ensure every customer feels supported and valued during this change,” it said in the statement yesterday.
The banks announced that the discounts will take effect from the effective date of the HPA, which is anticipated to be in the first quarter of 2026.
Those that qualify include individuals and micro or small businesses that entered into a fixed-rate hire-purchase agreement which applied the Rule of 78 method during the 18-month grace period under the amended Act before HPA takes effect.
They must also have chosen to settle their hire-purchase financing early, which translates to any time before loan or financing maturity.
The banks added that the goodwill discount will be calculated based on the features of the existing hire-purchase agreement (such as timing of early settlement and rate structure) and applied to the net balance due.
The exact calculation and amount of the goodwill discount will vary by bank and product and will be explained to customers when they apply for early settlement.
“The intention is to offer early settlement treatment that is broadly comparable to the approach under the amended Act.
“Once the HPA has come into effect, customers are encouraged to visit official bank websites or branches for more information.
“They may also contact their respective banks for guidance on eligibility and application procedures for the goodwill discount and stay informed through announcements from industry associations,” the associations added in the statement.
Under the newly passed HPA by the Dewan Negara this week, consumers who choose hire-purchase agreements in the future will have their interest payments calculated solely on the remaining outstanding amount.
This means that their interest payments will decrease with each payment made.
