Banks Will Offer “Goodwill Discount” for Early Car Loan Settlements

Malaysian banks have agreed to introduce a “goodwill discount” for customers who choose to settle their fixed-rate car loans ahead of time, marking a coordinated industry response to the country’s newly amended Hire-Purchase Act.

The announcement follows Parliament’s approval of the Hire-Purchase (Amendment) Bill, which phases out the long-criticised Rule of 78 interest formula. Once the updated law takes effect, all new hire-purchase contracts will adopt the reducing-balance method, a system considered far more equitable for borrowers.

Until then, banks are offering an interim solution for existing customers still bound by the old structure. The goodwill discount is meant to narrow the gap between the outgoing formula and the fairer approach mandated under the revised Act, especially for those intending to clear their loans before maturity.

Industry groups said the move is intended to reassure customers as the transition begins, adding that lenders want borrowers to feel supported during this regulatory shift.

Customers with fixed-rate loans calculated under the Rule of 78 may qualify if they opt for early settlement and maintain a clean repayment record. Banks will determine the exact discount amount case-by-case, and borrowers are encouraged to contact their lender to confirm eligibility and understand how the rebate will be computed.

Those who plan to continue paying their loans until the original end date do not need to take any further steps.

The goodwill discount will come into effect once the amended Hire-Purchase Act becomes law, expected in the first quarter of 2026. Banks will issue further notifications when the implementation date is confirmed.