20th April 2026 - 3 min read
Hong Leong Bank (HLB) auto loan customers can now make lump-sum principal prepayments on their hire purchase accounts, effective 17 April 2026. The option is available to both fixed-rate and variable-rate customers, and can be done over the counter at any HLB branch.
The update comes ahead of the Hire-Purchase (Amendment) Act 2026 taking effect on 1 June 2026, which overhauls how hire purchase interest is calculated and introduces the reducing balance method across the industry.
Previously, if you paid more than the scheduled amount on your HLB auto loan, the excess was treated as an advance payment for your next instalment. You can now make a separate principal prepayment that directly reduces the outstanding balance on your loan.
Prepayments must be made in multiples of RM1,000 (or another amount acceptable to the bank). The payment goes straight toward reducing your principal balance, which is the actual amount you still owe before interest.
A principal prepayment does not reduce your monthly instalment. Instead, it shortens the number of remaining instalments. So if you’re on a seven-year loan and make a lump-sum prepayment, you’ll still pay the same amount each month, but you’ll finish paying off the loan sooner.
For variable-rate customers, the prepayment reduces what HLB calls the Eligible Outstanding Balance, which is the principal amount used to calculate your interest. Since variable-rate interest is calculated on a monthly rest basis, a lower balance means less interest charged going forward.
Do note that a prepayment made before your next instalment due date won’t immediately change the interest calculation. It only takes effect from the following due date onward.
For variable-rate customers, the savings can be significant. Because interest is calculated on your remaining principal each month, reducing that balance early means you pay less interest over the life of the loan.
HLB’s product disclosure sheet shows this example: on a RM100,000 loan over 60 months at the current rate, the total interest cost comes to RM13,227. A prepayment made early in the loan term would reduce the principal balance that interest is charged against, lowering the total interest you pay by the end of the tenure.
For fixed-rate customers, the savings work differently. Interest on a fixed-rate hire purchase loan is calculated upfront on the full principal amount, so a prepayment won’t change how much interest is charged on each instalment. It will, however, cut the number of instalments remaining, meaning you finish the loan earlier and reduce the total amount paid.
Once you make a prepayment, you cannot redraw or reborrow that amount. The money goes toward the principal and stays there, unless HLB expressly permits otherwise.
The prepayment also won’t lower your monthly instalment unless you’ve arranged this separately with the bank in writing. The default outcome is always a shorter tenure, same instalment.
A principal prepayment makes the most difference when it’s made early in the loan term, and when the auto loan carries a higher interest cost than your other debts. If you don’t yet have an emergency fund in place, that should probably come first.
HLB has updated its Terms and Conditions [PDF] of Hire Purchase Agreement (with a new Section 6 on principal prepayment) and its Product Disclosure Sheet [PDF] for variable-rate auto loans to reflect these changes. Both documents are available at HLB branches and on the bank’s website.
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As a creative content writer, Eloise has covered finance, business, lifestyle topics, and even moonlights as a singer-songwriter outside of RinggitPlus. Her current interests are learning the best ways to optimise spending and credit card hacks to gain more airline miles.
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