Borrowing more than RM100,000 comes with higher stakes as unpaid debts at that level can lead to bankruptcy under Malaysian law, which is why Bank Negara Malaysia (BNM) will soon require borrowers seeking large personal financing to complete a short financial education course  before they commit to a personal loan

The requirement, which takes effect on 1 January 2027, is meant to help consumers assess whether they can manage a major financial commitment before signing a loan agreement. The training course  will apply to new personal financing exceeding RM100,000 and will be available through banks or the Credit Counselling and Debt Management Agency (AKPK).

Why RM100,000 Is The Cut-Off

BNM explained that the RM100,000 threshold is aligned with the country’s bankruptcy limit under the Insolvency Act 1967. The aim is to focus on borrowers who face the highest potential impact if repayment becomes difficult. Setting the requirement too low would add unnecessary steps for small loans, while setting it higher would fail to protect those most exposed to financial stress.

The training module is designed as a self-assessment tool rather than a class or test. It will take about fifteen minutes to complete online and guide borrowers to review their income, existing debts, and repayment capacity. By creating a brief pause before borrowers take on a large commitment, BNM hopes to reduce over-borrowing and encourage more considered decision-making.

The approach builds on AKPK’s RumahKu module for first-time home buyers, which has helped participants better understand their affordability before purchasing property. According to BNM, many users of that programme decided to delay or adjust their loan plans after learning more about their financial obligations.

Fairer Personal Financing From 2027

The new education module forms part of broader reforms to Malaysia’s personal financing framework. BNM first introduced the idea of moving away from flat-rate and Rule of 78 interest calculations in an earlier policy update, but the recent media workshop offered clearer guidance and a confirmed implementation timeline.

From 2027, all new personal financing must adopt the reducing balance method, ensuring that interest or profit is charged only on the outstanding balance of a loan rather than the full amount from the start. BNM said this transition is meant to provide a fairer and more transparent repayment structure for borrowers, particularly those who settle early or refinance.

At the same time, banks will be required to disclose the effective interest rate (EIR) or effective profit rate (EPR) in all personal financing offers. BNM emphasised that clearer and standardised presentation of effective rates will now be mandatory for all financial institutions offering personal financing, including both banks and non-bank lenders under its supervision. The move is intended to help consumers compare products on an equal basis and understand the true cost of borrowing.

Together, these changes form part of the central bank’s push to make personal financing more transparent and accountable to consumers.

Clearer Rules On Refinancing And Top-ups

BNM has also refined the treatment of cases where borrowers refinance an existing home loan for a higher amount. Any additional funds obtained through that refinancing and used for personal spending, such as consolidating debts or covering non-housing expenses, will now be treated as personal financing and limited to a maximum tenure of ten years.

Top-up amounts used for home-related purposes, including renovations, insurance, or legal fees, may continue under normal home financing terms. This distinction is intended to prevent short-term personal spending from being stretched across long-term mortgage commitments, reducing the risk of repayment difficulties later on.

Updates To Hire Purchase Protection

Amendments to the Hire Purchase Act 1967 are also being rolled out to modernise vehicle financing and strengthen consumer protection. Once gazetted, the revised law will take immediate effect with an eighteen-month transition period for system upgrades.

The changes will abolish the Rule of 78 for early settlements and require all hire purchase loans, whether fixed or variable rate, to use the reducing balance method. Lenders will also have to disclose the effective interest rate on all agreements.

The amended Hire Purchase Act 1967 will also formally recognise the use of electronic and digital signatures and allow for online delivery of contracts, bringing vehicle financing in line with current digital practices. The Act will retain the existing interest rate caps for hire purchase financing, set at 17 per cent per annum for most tenures and 16 per cent per annum for fixed-rate loans exceeding five years.

Faster And Clearer Complaint Handling

BNM has tightened expectations for how financial institutions manage customer complaints. Under the revised policy, banks and insurers must acknowledge complaints within one working day, resolve straightforward issues within five working days, and conclude complex cases within twenty working days.

If additional documents such as police or medical reports are required, institutions may extend the process to thirty working days, or up to sixty working days if the matter is escalated to senior management.

Financial institutions must also display their complaint channels clearly on websites and at branches, along with information about redress avenues such as the Financial Ombudsman Scheme and BNMLINK. These requirements are aimed at improving accountability and giving consumers a clearer route to resolution.

Supporting Vulnerable Consumers

BNM’s updated Fair Treatment of Financial Consumers policy includes a new focus on vulnerable groups such as senior citizens, persons with disabilities, and those facing temporary hardship or limited digital access.

Financial service providers are expected to identify customers who may need additional support and tailor their services accordingly. This may include clearer communication, accessible digital platforms, or personalised assistance.

Fairness As The Foundation

Together, these initiatives form part of BNM’s long-term effort to strengthen fair conduct and promote responsible behaviour across the financial sector. The central bank wants institutions to embed fairness into every stage of their operations, from product design to customer service.

By combining financial education with fairer loan structures, stronger consumer protection, and better complaint resolution, BNM aims to create a more transparent and inclusive financial system.

The RM100,000 threshold serves as a reminder that beyond a certain point, personal financing carries real and lasting consequences. Through the new requirement, BNM hopes borrowers will take the time to understand those risks before making major financial commitments.

Follow us on our official WhatsApp channel for the latest money tips and updates.