This is a significant shift in how car loans (hire purchase) work in Malaysia. Moving from the Rule of 78 and Flat Interest Rates to the Reducing Balance Method (using Effective Interest Rate – EIR) makes car loans behave more like housing loans.
The New Way: Reducing Balance Method (EIR)
Interest is now calculated based on the outstanding balance of the loan each month. As you pay down the principal, the interest charge for the next month decreases.
Why this matters for the 2026 Amendment
Under the Reducing Balance Method, if you pay extra toward your principal or settle the loan early, the interest savings are significantly higher than the old “Rule of 78” rebate system.
Car Loan Calculator (2026 Act)
Legal Disclaimer:
This tool is designed to demonstrate the mechanical differences between Flat Rate (Rule of 78) and Reducing Balance (EIR) methods as per the 2026 Hire Purchase Amendment. Figures are estimates and do not constitute a financial offer. The 2026 Act mandates higher transparency; please consult your financial provider for a finalized Amortization Schedule.
This tool is designed to demonstrate the mechanical differences between Flat Rate (Rule of 78) and Reducing Balance (EIR) methods as per the 2026 Hire Purchase Amendment. Figures are estimates and do not constitute a financial offer. The 2026 Act mandates higher transparency; please consult your financial provider for a finalized Amortization Schedule.