Hire Purchase Calculator: Flat Rate vs Reducing Balance
Key in your loan details once and compare the old flat-rate method against the new reducing-balance (EIR) method side by side.
Loan Details
Enter the flat rate as quoted by the dealer/bank -- this calculator derives an equivalent reducing-balance EIR from it to build the "New Method" comparison.
Old Method — Flat Rate
Pre-June 2026
RM0
per month
Total Interest
RM0
Total Payable
RM0
New Method — Reducing Balance
From 1 June 2026 (EIR)
RM0
per month
Total Interest
RM0
Total Payable
RM0
Estimated EIR
0.00%
Monthly Savings
RM0
Total Interest Saved
RM0
| Metric | Old — Flat Rate | New — Reducing Balance |
|---|
How This Is Calculated
- Old (flat rate): total interest = principal × flat rate × tenure (years), spread evenly over every month regardless of the declining balance.
- New (reducing balance / EIR): interest is charged only on the outstanding balance each month, like a standard amortizing loan. The EIR is estimated from your flat rate using the common approximation EIR ≈ 2 × tenure × flat rate / (tenure + 1) -- this is an illustrative conversion, not an official bank figure.
- Principal: car price minus your down payment.
- Scope: the new method applies only to hire purchase agreements signed from 1 June 2026 onward, and is rolling out across lenders in phases -- your actual quote may still be flat-rate depending on the lender.
- Disclaimer: this calculator is a guide only and does not replace an official loan quote from your bank or dealer.
Frequently Asked Questions
What changed with the Hire Purchase (Amendment) Act 2026?
From 1 June 2026, new hire purchase agreements move from flat-rate interest (with the Rule of 78) to an EIR reducing-balance method, where interest is charged on the outstanding balance instead of the full original loan amount.
Does this affect my existing car loan?
No -- it only applies to new agreements signed from 1 June 2026 onward, and rollout is phased across lenders. Existing loans keep their original flat-rate terms unless refinanced.
How is the reducing-balance EIR estimated here?
Using the standard approximation EIR ≈ 2 × tenure(years) × flat rate / (tenure(years) + 1), then amortized like a reducing-balance loan. Treat it as an illustrative estimate, not an official quote.