On 30 September 2025, Bank Negara Malaysia (BNM) released its latest Policy Document on Personal Financing, setting stronger safeguards for both financial service providers (FSPs) and borrowers.
The document aims to curb irresponsible lending practices while encouraging prudent borrowing behaviours among Malaysians.
🔑 Key Highlights of the New Policy 👀
- Maximum Tenure of 10 Years
~ Personal financing must not exceed 10 years.
~ This applies to all new applications, restructurings, or top-ups that increase loan amounts.
~ Even if offered under a home financing product or secured against an unencumbered property for personal use, the 10-year cap still applies. - Ban on Flat Rate and Rule of 78
~ FSPs are now prohibited from offering personal financing where charges are calculated using Flat Rate or Rule of 78 – front-loading of interest in early periods.
~ Only reducing-balance based fixed or floating rates are allowed going forward. - Clearer Disclosure for Borrowers
To ensure borrowers fully understand the real cost of financing, FSPs must provide transparent and upfront information at the pre-contract stage:
~ Effective interest/profit rate (EIR).
~ Total repayment amount.
~ Basis of calculation (daily/monthly rest).
~ For floating rates: conditions under which rates may increase. - Financial Education for High-Value Borrowers
~ Applicants for personal financing exceeding RM100,000 must attend and complete a financial education module, either by the FSP or via AKPK (Agensi Kaunseling dan Pengurusan Kredit).
~ FSPs may also encourage higher-risk borrowers to undergo the module, even if borrowing below the threshold.
📅 Effective Dates
Immediate effect: General requirements.
From 1 January 2027:
- Maximum tenure rules (10.3–10.10).
- Ban on flat rate & Rule of 78 (10.11–10.12).
- Disclosure of effective interest/profit rate (10.13).
- Mandatory financial education for >RM100k borrowings (10.17–10.18).
🧠What This Means for Malaysians?
For borrowers:
Expect clearer disclosures, fairer interest methods, and safeguards against over-borrowing. If you’re applying for large financing (>RM100k), you’ll need to go through a financial education module first.
Expect clearer disclosures, fairer interest methods, and safeguards against over-borrowing. If you’re applying for large financing (>RM100k), you’ll need to go through a financial education module first.
For lenders:
Stricter compliance, reporting, and prohibition on outdated charging methods. Greater accountability in assessing affordability.
Stricter compliance, reporting, and prohibition on outdated charging methods. Greater accountability in assessing affordability.
For the economy:
A more sustainable retail credit market, reducing risks of household debt distress in the long run.
A more sustainable retail credit market, reducing risks of household debt distress in the long run.
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