From 1 June 2026 Malaysia’s Hire Purchase (Amendment) Act 2026 replaces the opaque flat‑rate and Rule‑of‑78 systems with the Effective Interest Rate (EIR) and a reducing‑balance method. Lenders must display EIR in marketing and agreements, enabling true apples‑to‑apples comparisons; EIR is capped at 17% for loans up to five years and 16% for longer tenures.
Flat Rate and Rule of 78 Abolished; EIR and Reducing Balance Take Over
Interest will be charged on outstanding balances, so early settlement yields meaningful savings—roughly half of remaining interest versus minimal savings previously. Existing fixed‑rate borrowers may receive voluntary “goodwill” rebates, and lenders have until 31 March 2027 to update systems; digital signatures are now permitted nationwide.
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