14 banks start offering ‘reducing balance’ method for HP loans
Minister says 80% of 429 hire-purchase providers are also transitioning from the old flat-rate and the Rule of 78 calculation methods.
The Malaysian government has mandated that 14 out of 20 banks must transition to a reducing balance method for hire-purchase loans by December 31. This method calculates interest charges based on the outstanding principal amount, ensuring a more accurate reflection of the loan's true cost. Armizan Mohd Ali, the domestic trade and cost of living minister, stated that 80% of the 429 hire-purchase providers under the Association of Hire Purchase Companies Malaysia have already started this transition.
The remaining 20% are given until March 31, 2027, to complete the switch. The amendments to the Hire-Purchase Act also abolish the Rule of 78 method, which allocated more interest to earlier loan instalments and resulted in borrowers with higher outstanding balances upon early settlements.
Written by urgent.news from Free Malaysia Today's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
This story
This is one outlet's version. Read the fullest account.
- 14 banks start offering ‘reducing balance’ method for HP loans freemalaysiatoday.com
