Banks will offer discounts for customers who settle their existing fixed-rate hire purchase loans early as the Hire-Purchase (Amendment) Bill 2005 takes effect in 2026, according to a joint statement by the Association of Banks in Malaysia, the Association of Islamic Banking and Financial Institutions Malaysia and the Association of Development Finance Institutions of Malaysia, as cited by The Edge Malaysia.
The move is aimed at providing fairer treatment to borrowers affected by the current flat-rate and Rule of 78 structures, according to the joint statement. The “goodwill discount is an industry-wide measure” which is designed to provide affected customers with treatment that is comparable to that of new customers under the act when they choose to settle their loans early, the association said.
The discount will be offered only to accounts that are not in arrears by more than 90 days, not under legal action or repossession order, and not undergoing existing restructuring and rescheduling or formal debt management programmes.
The programme will take effect once the Hire Purchase (Amendment) Bill is enforced, and it will be available until all affected fixed rate hire purchase agreements reach maturity, or are settled early within a period estimated of up to nine years, according to the report. Customers who continue paying loans until maturity will not be affected by the Rule of 78 method, and do not need to take any action, it added.
In October this year, the Dewan Rakyat passed the Hire Purchase (Amendment) Bill 2025, which abolishes flat-rate calculations and the Rule of 78 method of new hire-purchase financing.
A policy document was issued by Bank Negara Malaysia this year, a series of measures aimed at promoting prudent and responsible financing practices among financial service providers (FSPs), while also ensuring consumers are better informed to encourage responsible borrowing behaviour.
In particular, the document prohibits financial service providers from using a flat rate (also known as simple interest rate) and/or Rule of 78 method to compute interest/profit charge when offering personal financing from January 1, 2027.
Hire purchase providers have been given a grace period of 18 months from the date the amended Act is gazetted to implement these measures. Find out more about how the amendment will affect hire purchase loans, here.
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Right now where times are tough and money is tight under a failing gomen, settling loans early is the last thing people want to do. Having cash on hand is more important.
Failing “gomen”? I’m not sure. But I’m certain you’re a failing rakyat.
times arent tough .economy is growing, ringgit exchange rate streghten a lot since year 2023, bursa klci stock market up since 2023, cheap proton saga cheap budi95 petrol.
Suddenly all Malaysian become rich
Dont be fool with this..Im afraid Inland Revenue will ask us go into their office drink kopi or teh once we made payment one shot…