Hire Purchase Loan Moratorium : Two U-Turns = No Charges!

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The Finance Minister of Malaysia just announced another U-turn (sorry, clarification) of the hire-purchase loan moratorium – no additional charges will be levied!

Here are the details of what we hope will be the final word on the hire purchase loan moratorium!


Hire Purchase Loan Moratorium : A Quick Summary

When Bank Negara first announced the hire purchase loan moratorium, it seemed clear that NO ADDITIONAL interest would be incurred 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, they later 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.


Hire Purchase Loan Moratorium : No Additional Charges!

Needless to say, there was an uproar. After all, their own FAQs and those of many banks specifically stated that the hire purchase loan moratorium would not incur additional interest.

Today, the Finance Minister of Malaysia Tengku Dato’ Sri Zafrul Tengku Abdul Aziz announced that no additional charges will be levied on hire purchase loans (both conventional and Shariah-compliant).

Hire Purchase Loan Moratorium : Two U-Turns = No Charges!

Here is the English translation of the official press release in Bahasa Malaysia (below) :

No Additional Charge On Hire Purchase Instalments (Conventional And Shariah)

Referring to the Government’s recommendation to the banking industry on the negation of additional charges on instalments for hire purchase loans (conventional and Shariah), we are pleased to announce that the Ministry of Finance has reached an agreement with the banking industry on this issue.

The agreement was reached to ensure that the monthly instalment of the loan will not change for the borrower (conventional and Shariah) throughout the financing period.

This also means that no additional charges will be incurred during the moratorium period (deferment).

Accordingly, the borrower will need to continue with the instalment as usual based on the terms of the agreement with their respective banks, including an additional 6 months for the entire financing schedule if they choose to take advantage of the moratorium. Further information is available from the respective banks. The government hopes this decision will ease the burden of the people during this difficult time.



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