Bank Negara Malaysia has announced that from 1 January 2027, all licensed banks will be required to adopt the reducing balance method for personal financing products. The flat rate method, which calculates interest on the original loan amount throughout the entire tenure, will be phased out. The Rule of 78 — an early settlement calculation that front-loads interest charges — will also be banned at the same time. The move aims to give borrowers a clearer and more accurate picture of the true cost of their loans, ensuring greater transparency across Malaysia's lending market.
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