Introduction of Hire-Purchase-i Financing with Early Settlement Discounts
Dear valued customers,
Pursuant to a joint directive by the Association of Banks in Malaysia (“ABM”), Association of Islamic Banking and Financial Institutions Malaysia (“AIBIM”), and the Association of Development Finance Institutions of Malaysia (“ADFIM”) on 16 March 2026, Hong Leong Islamic Bank (“HLB Islamic”) will be introducing key amendments to its hire-purchase financing practices. These changes are in alignment with the Hire-Purchase (Amendment) Act 2026 (HPAA), which takes effect on 1 June 2026.
Under the new HPAA framework:
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The Rule of 78 calculation method and flat profit rate structure will be phased out.
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All hire-purchase financing will be changed to use a reducing balance method.
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Effective Profit Rate (“EPR”) will be disclosed, enabling customers to better understand the true cost of their financing.
As part of this transition, HLB Islamic will offer goodwill discounts to eligible customers who choose to pay off their existing Rule of 78 fixed-rate financing early. This initiative ensures that any outstanding balance upon early settlement is comparable to what it would have been utilizing the new reducing balance method.
To be eligible for the goodwill discounts, agreements must be entered into before 1 June 2026 or during the transition period for system enhancements, which will remain in place until 31 March 2027.
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