Bank Negara “clarified” that they have always said that consumers would be charged interest during the hire purchase loan deferment.
Let’s find out if that is true, and if not, what’s changed…
BNM Loan Moratorium / Deferment : What Is It?
On 24 March 2020, Bank Negara Malaysia announced that they would be implementing additional measures to help borrowers during COVID-19 pandemic.
One of these measures is an automatic loan moratorium or deferment for six (6) months.
Bank Negara On Hire Purchase Loan Deferment : TLDR Summary
When I first wrote my opinion on the hire purchase loan deferment, it seemed clear – the hire purchase loan deferment would incur NO ADDITIONAL interest during the 6 months moratorium.
After all, hire purchase loans are fixed rate – the interest is calculated at the beginning, and added to the loan, before the full sum is divided to arrive at your monthly instalment.
Because the interest is already fixed and not dependent on the outstanding principal, the interest will not accrue during the hire purchase loan deferment.
While Bank Negera Malaysia’s own FAQ initially supported this (see timeline below), they have now clarified and changed their FAQs :
- Banks will be allowed to charge interest on hire purchase loans during the loan moratorium
- Banks will offer you the option to pay all 6-months deferred instalments PLUS interest at the end of the loan moratorium.
- Alternatively, you can stagger the repayment of the total deferred instalments PLUS interest over the extended loan tenure.
- Finally, you can opt-out of the hire purchase loan deferment now to avoid paying additional interest.
Bank Negara On Hire Purchase Loan Deferment : Timeline
27 March 2020 : No Additional Interest Charged During Deferment
In their FAQ that was revised on 27 March 2020, Bank Negara Malaysia specifically pointed out that “no additional interest / profit [would be] charged during deferment“.
21 April 2020 : Section Deleted
The Bank Negara FAQ on the loan moratorium was suddenly revised on 21 April 2020, and the entire section above was removed.
30 April 2020 : Bank Negara Malaysia Announces Clarification
On 30 April 2020, Bank Negara clarified the operationalisation of moratorium for hire purchase loans and fixed rate Islamic financing.
In the press release, they (kind of) announced that banks would be allowed to charge interest during the moratorium.
1 May 2020 : Correction + Clarification
Bank Negara Malaysia followed up with a new FAQ to clarify and correct their earlier FAQs. Buried right at the bottom was this :
Bank Negara Malaysia also provided a new illustration on how much additional interest we would need to ultimately pay for the deferment :
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