Announcement by Bank Negara Malaysia on Hire Purchase/Fixed Rate Islamic Financing - A Quick Summary
Bank Negara Malaysia (BNM) announced that hire purchase loans and fixed rate Islamic financing deferments to be either paid back after deferment ends or will be subject to interest/profit rate on deferred instalments.
BNM announced that banking institutions are formalising agreements which reflect the revised payment terms with borrowers/customers with hire purchase loans and fixed rate Islamic financing to give effect to the 6-month moratorium on loan/financing payments to comply with the procedural requirements under Hire-Purchase Act 1967 and Shariah requirements including changes to the payment schedules and/or amounts as a result of the moratorium.
Quick Summary Related to BNM Announcement
1. This affects only Hire Purchase / Fixed Rate Islamic Financing products such as Personal Financing-i. There are no new changes announced to housing loans as they still refer to the previous announcement made on 25 March 2020.
2. Moratorium now is on an opt-in basis meaning you would have to apply. Banks will contact you with the details, and banks are supposed to inform you how your loans / financing would be affected if you choose to defer you monthly repayments.
3. If you opt not to defer, please continue paying your monthly repayments as usual.
4. Deferment period is still 6 months from 1st April - 30 Sept 2020.
5. Repayment of deferment amount (for those choosing to defer the monthly repayments for the deferment period) are as follows:
If you pay the accumulated 6 months’ deferred instalments together with your October 2020 instalment, you will not be charged any additional interest/profit (i.e. term charges) on your deferred instalments.
Alternatively, you have the option to extend your loan tenure by 6 months. In this case, interest/profit will be charged on the amount of your deferred instalments based on the contracted rate in your hire purchase agreement. No additional charges or legal fees are allowed to be charged to borrowers/customers.
6. Different banks might have different terms and conditions. Please refer to your respective banks for further details. Some banks might require you to go to their branches while others have an online or SMS-based process. BNM has reiterated that the deferment is still automatic with no changes to the eligibility criteria.
Take Control of Your Financial Situation
Our advice to clients for the moratorium will not be impacted by the announcement made above. Do take control of your financial situation and adapt to the new normal.
If you’re unsure of what actions needs to be taken or for additional clarification once you receive the notification from your respective banks, please get in touch with an expert to help you advice on actions you would need to take moving forward.
Additional reference: Soalan Lazim Mengenai Pengendalian Moratorium bagi Pinjaman Sewa Beli dan Pembiayaan Islam Berkadar Tetap (bnm.gov.my)