THE country’s banking industry has committed to extending goodwill discounts to borrowers who opt to settle their existing fixed-rate hire-purchase loans ahead of maturity, following Dewan Negara’s approval of the Hire-Purchase (Amendment) Bill (HPA).
The shift is part of a wider overhaul that will abolish flat-rate calculations and the long-criticised Rule of 78 for all future hire-purchase agreements.
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) confirmed that qualifying customers will receive the discounts at the point of early settlement.
“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,” the groups said.
The goodwill discounts will apply from the date the HPA becomes effective, anticipated in the first quarter of 2026.
Eligibility extends to individuals and micro or small enterprises that entered into fixed-rate hire-purchase agreements applying the Rule of 78 during the Act’s 18-month grace period, provided they settle their financing before maturity.
According to the associations, the discount will be calculated based on the terms of each existing agreement, including the timing of early settlement and the original rate structure, and then applied to the outstanding balance.
Each bank will determine its own formula, which will be explained to customers who come forward to settle early.
“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 statement added.
Under the amended legislation, interest payments for future hire-purchase loans will be calculated solely on the remaining outstanding sum, rather than on fixed rates applied across an entire loan tenure.
Borrowers will therefore see their interest charges reduce progressively with each monthly repayment. The reform spells the end of fixed-rate car loans, a staple of the Malaysian market for decades. - December 3, 2025
