• Glossary Of Terms For Car Loans Malaysia


    Acceleration Clause: A provision in the loan contract stipulating that a borrower should pay all outstanding dues immediately in event of loan default.

    Acquisition Fee: The fee charged by leasing companies to arrange for car lease.

    Administrative Fees: Includes all fees charged to process a car loan.

    All-in Pricing: Advertised car price that includes all fees, charges and tax.

    Amortisation Amount: The total loan amount to be repaid including the total interest.

    Amount Financed: The total loan amount approved for a car.

    Annual Percentage Rate: The total interest amount of a loan for a year.

    Auto Loan Calculator: An online calculator used to calculate monthly interest and monthly instalment amount to repay a loan.

    Automatic Payment: A fixed amount that would be debited automatically from your savings or checking account to repay your loan on a specific date every month. Also known as standing instruction.


    Borrower: It means the person who takes a loan from a bank or a financial institution.


    Certified Pre-owned Vehicle: A type of used car, but inspected and certified by a certifying authority.

    Comprehensive Insurance: Motor insurance that covers for any loss or damage to a car due to accident, fire and theft. It also covers liability in event of death or bodily injury to third-party.

    Credit Bureau: The department established by Bank Negara Malaysia to collect all financial information on borrowers and to deliver a credit report that is referred to by all banks and financial institutions before approving a loan.

    Credit Report: The report furnished by Credit Bureau based on information related to credit and financial history of all borrowers in Malaysia. All banks and financial institutions refer to this report to approve or decline a loan application.

    Credit Score: It refers to your credit rating based on the last 12 months of your financial history.


    Dealer: A business firm that buys and sells new and used cars.

    Defaulter: It refers to someone who does not pay back the loan or interest on time.

    Demo car/ vehicle: Car used by dealerships for test-drives.

    Deposit: The amount paid by the borrower while taking a car loan.

    Due Date: It means the date on which you need to pay the instalment amount each month.


    Early Settlement Fee: The fee you need to pay if you settle your loan fully before its tenure ends.

    Effective Interest Rate: The actual rate used by banks to calculate your total interest and monthly instalment amount. Also known as Effective Lending Rate.

    Eligibility Criteria: It refers to any criteria imposed by banks or financial institutions to approve and disburse a loan.


    Fees and Charges: It refers to any extra charges and fees associated with a loan. This would usually include Stamp Duty, processing fee, disbursement fee, late payment charges and early settlement charges.

    Fixed Interest Rate: Interest rate that remains fixed throughout the loan tenure.

    Fleet Vehicle: Cars or vehicles owned or leased by an organisation, company or a business.


    Good Credit: It refers to an excellent credit score based on your financial history of the past 12 months.

    Guaranteed Auto Protection: Insurance that covers the difference between your owed loan amount and the insurance payable amount if your car is damaged, totalled or stolen.


    Hire Purchase Loan: A type of car loan in Malaysia where you enter into a hire purchase agreement with the bank.

    Hirer: It refers to the person who borrows a hire purchase loan from a bank.

    Instalment: The fixed amount to be paid every month to repay a loan.


    Interest: It refers to the fee you need to pay to get a car loan. It is generally expressed as percentage rate for a year. Total interest would mean the total sum you have to pay based on your total loan amount and tenure.

    Islamic Financing: It refers to any loans offered by Islamic banks. Islamic banking is governed by the principles of Shariah.


    Late Payment Fees: Any fees you need to pay for not paying your minimum monthly instalment amount on or before the due date.

    Lender: This means the one who lends money to borrowers. It usually refers to banks or financial institutions.

    Loan Agreement: The agreement you make with a bank or a financial institution to borrow a loan and to repay it along with interest within a specified period of time.

    Loan Amount: It refers to the total amount you borrow from a bank.

    Loan Tenure: It refers to the period of time you are given to repay your loan. Tenure is usually determined at a time of loan application.


    Maturity Date: The date on which your loan tenure ends.

    Maximum Loan Amount: The maximum amount any bank would agree to lend to its customers.

    Minimum Loan Amount: The minimum amount any bank would agree to lend to its customers.

    Monthly Instalment Amount: The minimum amount you need to pay each month to settle your loan before the tenure ends.

    Motor Insurance: Insurance that covers your car for any loss or damage due to accidents, fire or theft.

    MSRP: Manufacturer Suggested Retail Price. It is the retail selling price that car manufacturers recommend to dealerships for each car.


    New Car: A car that does not have a sale record or a sale title. A car that is straight from the manufacturing company.


    Passenger Vehicle: A car designed to carry and transport passengers.

    Penalty Fees: Any fees or charges that are applicable for not following the terms and conditions imposed by a bank.

    Pre-owned Cars: A car that was owned and used by someone else. It usually means a used car.

    Principal: It refers to the loan amount borrowed from a bank excluding any interest.

    Profit Rate: This means the interest rate. Islamic banks use this term instead of interest rate as interest is prohibited as per Shariah principles.


    Rebate: Any refund calculated on pro-rata basis.

    Repossess: It happens when borrowers default on the car loans. The bank would repossess the car due to non-payment of hire purchase loan.

    Road Tax: Compulsory tax to be paid by car owners to maintain the road network across Malaysia.


    Stamp Duty: It refers to the fees charged for any legal document or service to process a loan.


    Takaful: It refers to the insurance or protection provided for your loan. Takaful is offered only in Islamic banking where you need to contribute to a common fund that provides mutual benefits to all Takaful participants.

    Trade-in Value: The price offered by car dealers in exchange for your old car especially when you are buying a new car from the dealer.


    Underwriting: It refers to the bank process which would either approve your loan or decline it. It involves a set of terms and conditions imposed by banks, the central bank of Malaysia and the Malaysian government.

    Used Car: A car that was owned and used by someone else.


    Variable Interest Rate: It refers to an interest rate that varies during the loan tenure based on the fluctuations in the financial market.

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