Car Loan Early Settlement Calculator Malaysia 2026

Estimate what it costs to settle a car loan early in Malaysia, whether the agreement uses the old Rule of 78 or the reducing balance method.

Preview page. The rates are checked against official sources; the page is awaiting final review before it is published.

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This is an estimate for planning. Confirm the final figure with the bank, JPJ or LHDN before you commit.

How it's calculated

Settling early means paying the bank everything you would still owe, less the interest the bank has not yet earned. How that unearned interest is worked out depends on when the agreement was signed.

Flat rate agreements, which means almost everything signed before 1 June 2026 and some agreements signed during the banks' transition period to 31 March 2027, fixed all the interest for the whole term at the start. When you settle, the Hire-Purchase Act 1967 gives you a statutory rebate of the unearned interest by the Rule of 78, defined in section 2(1) of the Act:

rebate = total interest × n × (n + 1) ÷ (N × (N + 1))

where N is the total number of instalments and n the number not yet paid. The settlement amount is the remaining instalments, minus the rebate, minus any goodwill discount the bank offers, plus any fee.

Worked example (the default inputs). A loan of RM 60,000.00 at 2.5% flat over 5 years has total interest of 60,000 × 2.5% × 5 = RM 7,500.00 and an instalment of (60,000 + 7,500) ÷ 60 = RM 1,125.00. After 36 instalments, 24 remain, worth 24 × RM 1,125.00 = RM 27,000.00.

The rebate is 7,500 × 24 × 25 ÷ (60 × 61) = RM 1,229.51. With no discount and no fee, the settlement amount is RM 27,000.00 − RM 1,229.51 = RM 25,770.49. Paying to the end would have cost RM 1,229.51 more.

Reducing balance agreements under the Hire-Purchase (Amendment) Act 2026 have no rebate to compute, because interest only accrues on what you still owe: the settlement amount is simply the outstanding principal plus any fee. On RM 60,000.00 at 5% EIR over 5 years, the instalment is RM 1,132.27 and the balance after 36 payments is RM 25,808.94. The 24 remaining instalments would have cost RM 27,174.58, so settling avoids RM 1,365.64 of interest.

The Act counts the complete months still to go with no adjustment, but some banks deduct a one- or two-month deferment from the unexpired term, which lowers the rebate slightly. This page shows the statutory formula; the bank's settlement statement is the figure that counts.

Why old loans save less than people expect

The Rule of 78 front-loads interest. In a 60-month loan the first month carries a weight of 60 out of 1,830 and the last month only 1, so by the half-way point the bank has already earned about three quarters of the total interest. That is why the rebate on a loan with two years left is barely a sixth of the interest, and why settling in the final year saves very little. A reducing balance loan behaves the opposite way: every ringgit of principal you clear early stops earning interest at once.

Goodwill discounts since June 2026

On 16 March 2026 the banking associations announced that from 1 June 2026 banks give goodwill discounts, on top of the statutory rebate, to individuals and micro and small businesses who settle a Rule of 78 agreement early, whether it was signed before 1 June 2026 or during the transition period to 31 March 2027. The account must not be more than 90 days in arrears, under legal action or repossession, or in a restructuring programme. No formula is published: each bank sets the discount from the tenure and the timing of settlement. Ask for the discount to be shown as a separate line on the settlement statement, then enter it here to see the net amount.

FAQ

Why is my car loan settlement higher than I expected?

Because under the Rule of 78 the bank earns most of the interest early. After 36 of 60 instalments you have paid 60% of the instalments, but the formula treats only about 16% of the total interest as unearned. The rebate on the default loan is RM 1,229.51 out of RM 7,500.00 of interest, so the settlement is RM 25,770.49 rather than the RM 21,600.00 you might expect from a simple share of the loan.

How is the Rule of 78 rebate calculated?

Rebate = total interest × n × (n + 1) ÷ (N × (N + 1)), where N is the total number of instalments and n the number still unpaid. The name comes from a one-year loan: 1 + 2 + … + 12 = 78. Each remaining month carries a smaller weight than the one before it, which is why the rebate shrinks quickly as the loan ages.

Does the bank give a discount on early settlement?

The statutory rebate is a legal minimum under the Hire-Purchase Act 1967. Since the move to reducing balance in June 2026, banks have announced goodwill discounts for customers settling older flat-rate agreements early; the amount and conditions vary by bank, so ask for the figure in writing and enter it in the goodwill field.

Is it worth settling a car loan early?

Compare the saving shown here with what the same money could earn or repay elsewhere. On an old flat-rate loan the saving is often small in the final two years, and a credit card or personal loan at a higher rate is usually the better target. On a reducing balance loan the saving is the full interest you avoid, which makes settling more attractive the earlier you do it.

How do I get the official settlement figure?

Request a redemption or settlement statement from the bank, usually through the app, the call centre or a branch. It is valid for a stated number of days, includes any fee and the exact rebate, and is the figure you must pay. Use this page to check that the statement is in the right range and to decide whether to ask for a goodwill discount.

Sources

Verified against official sources Rates last checked: 21 October 2026