KUALA LUMPUR, Nov 11 — From January 2027, anyone applying for personal loans exceeding RM100,000 will be required to complete a 15-minute financial education module under Bank Negara Malaysia’s (BNM) new policy aimed at assessing borrowers’ financial readiness and promoting smarter borrowing choices.

A BNM spokesman said the module is adapted from the RumahKu online programme offered by the Credit Counselling and Debt Management Agency (AKPK), which helps prospective first-time homebuyers make prudent and informed financial decisions.

Citing the module’s impact, the spokesperson added that nearly one in five participants reconsidered their housing plans — with 15.6 per cent delaying their loan applications and 3.4 per cent seeking additional financial guidance.

For new requirements, consumers will have the option of accessing the module through AKPK or their respective financial service providers (FSPs).

The financial education module will be offered online for convenience, and FSPs can verify proof of completion once consumers finish it.

The module will not be graded, as its purpose is educational. Instead, participants will answer questions designed to help them review existing debts, assess affordability, and identify additional costs they might not have considered.

A BNM spokesman said the RM100,000 threshold was chosen for its balance of impact on banks and benefits to consumers, noting that it aligns with the bankruptcy threshold under the Insolvency Act.

“We want consumers to really self-assess whether they truly need this RM100,000 and understand the consequences of non-repayment, which can lead to bankruptcy,” the spokesman said.

Regarding the January 1, 2027 implementation date, the spokesman said it was selected to ensure system readiness, taking into account frontliners’ preparedness and providing an optimal experience for consumers.

New rule on how interest is calculated

Under the revised personal financing policy, BNM will also ban the use of flat-rate and Rule of 78 methods in new loan offerings, requiring lenders to adopt the reducing balance method instead.

The prohibition will also take effect on January 1, 2027, in line with amendments to the Hire-Purchase Act 1967 recently tabled in the Dewan Rakyat in October.

The proposed Bill seeks to amend the Act to deliver fairer outcomes for consumers in hire-purchase agreements, specifically by updating the formula used to calculate term charges.

A flat rate charges interest on the entire principal over the loan term, while the Rule of 78 frontloads interest payments into the earlier instalments. Under the reducing balance method, interest is applied only to the outstanding loan amount, which decreases over time.

The policy also requires FSPs to inform consumers of the effective interest or profit rate (EIR/EPR) of a personal financing product at the pre-contractual stage.

The EIR and EPR reflect the real percentage of interest or profit paid over the loan term, based on the remaining balance each time a monthly payment is made.

Among other measures, the policy will also require FSPs to provide clearer reporting on home financing products intended for personal use.

This is aimed at safeguarding consumers amid rising household debt and ensuring borrowers do not take on loans beyond their means, which could risk the loss of their property. - malaymail