Image Credit: Copilot
KUALA LUMPUR, May 31: From June 1, eleven banks and hire purchase companies will begin offering loans under Malaysia’s updated Hire Purchase Act 2026.
The new law is designed to protect consumers and make loans, especially vehicle purchases, fairer and more transparent.
Domestic Trade and Cost of Living (KPDN) Minister Datuk Armizan Mohd Ali said more lenders will join by September, while others have until March 2027 to update their systems. The ministry encourages all institutions to adopt the new rules quickly, according to a Bernama report.
What’s changing for borrowers?
- No more flat interest rates or Rule of 78: Previously, most of their early payments went to interest, not the loan balance. That made early settlement expensive and unfair.
- New Reducing Balance Method: Interest will now be calculated on the remaining loan balance. This means if borrowers were to pay off early, they save more, and their payments will better reflect the true cost of borrowing.
- Effective Interest Rate disclosure: Lenders must show the real cost of financing, not just headline rates.
- Digital convenience: Electronic signatures and online document submissions are now allowed, speeding up the process.
- Fraud protection: Borrowers’ identities must be verified twice to reduce scams.
Armizan said these reforms aim to build a more transparent and consumer-friendly credit system, ensuring Malaysians get fairer deals when financing vehicles and other purchases.
WE