PUTRAJAYA: Eleven financial institutions and hire purchase providers will begin offering loans under Malaysia's revamped hire purchase framework from Monday (June 1), says Domestic Trade and Cost of Living Minister Datuk Armizan Mohd Ali.
He said the entities were fully prepared to implement the new framework when the Hire Purchase (Amendment) Act 2026 comes into force on June 1, with a second phase involving additional providers targeted for September.
“Consumers who wish to benefit from the new provisions are advised to check whether their financing provider is already operating under the amended framework before signing a hire purchase agreement.
“Financial institutions and hire purchase companies that are still upgrading their systems and processes will be given a grace period until March 31 next year,” he said in a statement on Sunday (May 31).
Armizan said the amended law was aimed at strengthening consumer protection and creating a fairer, more transparent and competitive hire purchase financing system.
Among the key changes is the abolition of the flat interest rate and the Rule of 78 method, which he said had long been criticised for causing borrowers to pay a large portion of interest during the early years of their loan tenure.
Under the previous system, consumers who settled their loans early often found that their outstanding balance remained high despite having paid several years of instalments.
“The new provisions introduce the reducing balance method and effective interest rate for fixed-rate hire purchase loans.
“Interest will now be calculated based on the remaining loan balance, making early settlement more transparent and fair for consumers,” he said.
