Personal Loan Early Settlement in Malaysia: Fees, Rebates and What Changes in 2027

Three different things get called "the cost of settling early", and confusing them is how people end up disappointed at the counter:

1. The early settlement fee — a charge some lenders apply for closing the facility ahead of schedule.
2. The settlement amount — what you must actually pay to close the loan today.
3. The interest you save — the portion of future interest you no longer pay.

A lender can charge no fee at all and still hand you a settlement figure far higher than you expected, because the third item depends entirely on how they calculate interest. That is the part worth understanding before you call.

The fee is often the smallest part, and it may not exist

Early settlement fees on Malaysian personal loans have typically run at 1% to 3% of the outstanding balance, sometimes with a ringgit floor.

Some lenders have dropped theirs. Maybank ceased the early settlement fee on its personal loans effective 31 March 2025.¹ It previously charged RM200 or 3% of the outstanding balance, whichever was higher, when a loan was settled in the first half of its tenure.

Worth knowing: Maybank's own personal loan FAQ page still described the old fee well after the announcement took effect. That is not unusual. Bank websites are large and announcement pages update before FAQ pages do.

So do not price your decision off a webpage. Ask for a written redemption statement. It is the only figure that binds.

What actually decides your saving: how interest is calculated

This is where the money is, and it is the question most borrowers never ask.

Reducing balance. Interest is charged on what you still owe. Pay down the principal and the interest follows it down. Settle early and you genuinely stop paying interest on money you no longer owe.

Flat rate. Interest is calculated on the original principal for the full tenure, then divided across the months. Your balance falls but the interest charge does not follow it. Settling early saves less than the arithmetic suggests it should.

Rule of 78. A sum-of-digits formula that front-loads interest into the early months. On a long tenure, settling halfway through refunds far less than half the remaining interest, because most of it has already been treated as earned. See our Rule of 78 early settlement guide for the full mechanics.

Two loans with the same advertised rate and the same monthly payment can produce very different settlement figures. The method is what separates them.

The rules change on 1 January 2027

Bank Negara Malaysia issued a revised policy document on personal financing in September 2025. Paragraphs 10.11 to 10.13 prohibit financial service providers from using a flat rate or the Rule of 78 to compute interest or profit on personal financing from 1 January 2027.²

From that date, personal financing must be priced on a fixed or floating rate, or with interest charged on the remaining principal after payments are applied to it.

Two things follow, and both matter for timing:

• Until 1 January 2027, flat rate and Rule of 78 remain legal for personal financing. If your loan is signed before then, it is likely still priced that way, and it stays that way for its life. The rule applies to how new financing is offered, not retroactively to your existing agreement.
• From 1 January 2027, applications above RM100,000 also require a financial education module with AKPK or the lender. BNM aligned that threshold with the bankruptcy limit under the Insolvency Act 1967.

Hire purchase is on its own, earlier timetable. The Hire-Purchase (Amendment) Act ended flat rate and Rule of 78 for new car loans from 1 June 2026. Personal loans and car loans are governed by different statutes and are changing on different dates. Do not assume a rule you read about car loans applies to your personal loan.

What to ask before you settle

Call and ask for these in writing:

• The redemption or settlement statement, valid to a stated date.
• Whether an early settlement fee applies, and how much.
• How interest is calculated on the facility: reducing balance, flat rate, or Rule of 78.
• The unearned interest or rebate being credited, and how it was derived.
• For Islamic financing, the ibra' amount. Ibra' is a rebate on unearned profit and you are entitled to ask how it was computed.

If the settlement figure looks higher than you expected, the usual reason is not a hidden fee. It is that less interest was rebated than you assumed, because the method front-loaded it.

A worked comparison

Consider RM 30,000 outstanding with three years left.

Under reducing balance, settling today stops interest on the full RM 30,000 from today onward. Your saving is close to the remaining interest.

Under flat rate or Rule of 78, a large share of the loan's total interest has already been allocated to the months you have paid. The rebate covers only the portion treated as unearned, which on a front-loaded schedule is materially less than the time remaining would suggest.

The gap between those two outcomes on the same nominal loan is the whole reason BNM is removing the methods.

Our flat rate calculator shows the same loan priced both ways, so you can see the difference before you commit rather than after.

The short version

A zero early settlement fee is good news but it is not the whole answer. Ask how interest is calculated, get the redemption statement in writing, and check the date on any fee schedule you are reading. If you are taking new personal financing close to 1 January 2027, the pricing method is about to change in your favour, and that is worth factoring into the timing.