KUALA LUMPUR, Feb 27 — Borrowers will pay less interest on their loans if they keep up their current monthly repayments, says the Association of Banks Malaysia, following its announcement on Wednesday of a move for banks to cut all monthly instalments across the board.
"If a customer were to opt to retain the amount of the monthly loan repayment instalments ... the loan gets repaid earlier and the interest portion may be lower," it said in a reply to an article in The Malaysian Insider yesterday.
However, ABM is sticking to the plan to make borrowers opt out if they wish to keep their original repayment amounts rather than make those who wish to pay less opt in instead.
"Banks will be officially notifying their customers on the quantum of reduction of the monthly loan repayment instalments and the effective date directly," it said.
Yesterday, the ABM plan was criticised for not coming clean on how banks stand to benefit from reducing monthly instalments across the board.
The Malaysian Insider had pointed out that as much as a third of interest savings from interest rate cuts would go into banks' pockets when monthly instalments are cut.
At any given interest rate, borrowers pay more interest over a longer loan period and pay less over a shorter loan period.
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