Proposal To Extend Financial Education Requirement To Housing, Car Loans

Samuel Chua

6th October 2025 - 4 min read

Financial consultant and Infaq Consultancy founder Afyan Mat Rawi has suggested expanding Bank Negara Malaysia’s (BNM) upcoming financial education requirement beyond personal financing to include housing and car loans. The move, he said, would help Malaysians make more informed borrowing decisions and reduce the risk of over-indebtedness.

Financial Education Could Cover Major Household Debts

According to Afyan, mortgages and car loans often make up the largest portion of debt for most Malaysians. He said introducing a financial education module for these loans would allow borrowers to better understand the long-term financial impact of their commitments.

“For housing, the module can highlight the difference between buying and renting, as well as ongoing costs like maintenance. For car loans, it should focus on depreciation, fuel expenses, insurance, and servicing,” he said.

Afyan suggested that such a module could serve as a prerequisite, similar to the Central Credit Reference Information System (CCRIS) check, to assess a borrower’s repayment ability before loan approval.

“With more than 30 banks competing to offer products, this module would serve as an umbrella before the storm,” he said.

BNM’s Financial Education Module to Start in 2027

The proposal follows BNM’s recent announcement of a new policy that will take effect in 2027. Under this policy, individuals applying for personal loans exceeding RM100,000 will be required to attend and complete a financial education module before their applications can be processed.

The central bank stated that training will be offered by participating banks or the Credit Counselling and Debt Management Agency (AKPK). The aim is to strengthen financial literacy and ensure that borrowers fully understand the implications of taking on large personal loans.

Understanding The True Cost Of Borrowing

Afyan noted that many loan applicants are drawn to promotional rates without realising the total cost they will eventually pay.

He gave the example of a RM120,000 loan at a 6% profit rate over 10 years, which comes with a monthly instalment of about RM1,333. “When you add it all up, the total repayment could reach RM160,000 to RM170,000. That additional RM40,000 to RM50,000 is the bank’s profit, not the principal,” he explained.

He said the module would help borrowers see beyond headline rates and understand how profit or interest affects the total amount paid over time. Without such awareness, he warned, repayments could consume a significant portion of monthly income, especially if salaries do not rise in tandem.

Data from the RinggitPlus Malaysian Financial Literacy Survey (RMFLS) 2025 show that financial pressures remain high among working Malaysians. Almost 47% of respondents said they live paycheck to paycheck, while only 27% of middle-income earners could sustain themselves for more than six months using savings. These figures suggest that many households may be vulnerable to repayment strain if their expenses rise or income falls.

Keeping The Module Practical And Accessible

Afyan emphasised that the financial education module must remain practical, concise, and easy to follow. He recommended that it be conducted by certified financial consultants and kept to a maximum duration of half a day.

“The cost of the module should be borne by financial institutions, not borrowers. Its content should clearly explain the difference between the loan principal and the bank’s profit, and how instalments impact monthly budgets,” he said.

He also cautioned that the programme must not become a mere formality. “Borrowers might attend but not take it seriously. It needs to be interactive, easy to understand, and connected to real-life situations,” he added.

Moving Towards Stronger Financial Awareness

If the requirement is extended to housing and car financing, the financial education module would cover a broader range of major loans commonly taken by Malaysians. This would align with efforts to ensure borrowers understand the full cost and long-term impact of their financial commitments.

BNM’s policy on financial education for large personal loans is scheduled to take effect in 2027. Any future expansion to other financing products would require further policy review and formal announcement by the central bank.

Why Financial Literacy Matters in Borrowing Decisions

Financial education of this kind can help strengthen financial literacy among Malaysians, especially when linked to real borrowing decisions. Better awareness of how instalments, profit rates, and loan tenures affect total repayment can help borrowers assess affordability before committing to long-term financing.

Findings from RMFLS 2025 indicate that financial preparedness is still uneven across income groups. Among those earning below RM2,000 monthly, 55% have started some form of retirement planning, while 40% remain unfamiliar with how credit scores work. RinggitPlus believes these numbers show gradual improvement in awareness and also highlight ongoing knowledge gaps that structured financial education could help close.

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