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MY - EN

Fixed Rate Reduce Balance

Introducing Fixed Rate Reducing Balance Method

Driven by transparency, powered by the reducing balance advantage.

Application approved from 02 July 2026 onwards

In line with the Hire Purchase (Amendment) Act 2026 (“HPAA”), CIMB will implement the Fixed Rate Reducing Balance method from 2 July 2026 onwards. This enhancement marks a significant step towards greater fairness, transparency, and customer protection.

What's Changing?

Key Benefits

Fixed Interest/Profit Rate

Your interest/profit rate remains fixed throughout the loan/financing tenure.

Reducing Balance Method

Interest/profit calculated on the outstanding principal balance.

Enhance Transparency

More transparent with the Effective Interest/Profit Rate (“EIR/EPR”).

Greater Savings

Enjoy more savings with early settlement.

So, what is the Effective Interest/Profit Rate (“EIR/EPR”)?

EIR/EPR represents the actual percentage of interest/profit you pay over the financing tenure. It reflects the amount of interest/profit you pay based on your outstanding principal balance. In comparison, Fixed Rate quote under Rule of 78 may appear cheaper but this does not result in lower monthly instalments and total interest/profit charged.

For example, let’s assume you borrow/finance RM50,000 over a period of 9 years (or 108 months)

   Interest/Profit Rate Quoted Monthly Instalment Total Interest/Profit Charged
Fixed Rate Rule of 78

3.00%

 RM588 RM13,500
Fixed EIR/EPR Reducing Balance 5.50% RM588 RM13,500

The above example illustrates that your monthly instalment remains the same with both Fixed Rate Rule of 78 and Fixed EIR/EPR Reducing Balance where you end up paying a monthly instalment of RM588 and the same total interest/profit of RM13,500. An EIR/EPR of 5.50% p.a. is equivalent to a Fixed Rate Rule of 78 of 3.00% p.a.

 

While Fixed Rate Rule of 78 may appear cheaper at first glance, it does not reflect the true cost of financing costs borne by you. It makes the hire-purchase product seem cheaper than it really is.

What is the difference between the Rule of 78 and the Reducing Balance method?

For example, let’s assume you borrow RM50,000 over a period of 9 years (or 108 months)

Method Rule of 78 Reducing Balance

Loan/Financing Amount

 RM 50,000 RM 50,000
Tenure (months) 108 108
Interest/Profit Rate 3.00% p.a. EIR/ERP 5.50% p.a.
Total Interest/Profit RM 13,500 RM 13,500
Monthly Instalment RM 588 RM 588

The total interest/profit charged remains the same if the loan/financing is fully serviced until the end of the tenure.

 

However, early settlement will result in a lower settlement amount.

For example, perform early settlement in month 36.

Monthly of early settlement

 36 36
Total Interest/Profit Charged RM 7,475 RM 7,158
Settlement Amount RM 36,307 RM 35,990
Differences in early settlement amount   Lower by RM 317
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