Cover image via Canva Teams
Follow us on Instagram, TikTok, and WhatsApp for the latest stories and breaking news.
Losing your job can affect your finances, but if you have a car loan, it does not pause automatically
In Malaysia, a hire‑purchase agreement remains legally binding under the Hire Purchase Act 1967, meaning repayments must still continue even if your income stops.
Here's the thing: Your car loan still has to be paid
Your monthly instalments are tied to your loan contract, not your employment status. If you miss a payment, the account immediately goes into arrears. From there, late‑payment charges may apply, and your overdue repayment history can be reflected in CCRIS and other credit‑reporting agencies, which banks use to assess your creditworthiness.
Most banks will not step in with help unless you reach out first.
So, what happens if you start missing payments?
Under the Hire Purchase Act 1967, the financier can usually begin repossession procedures after two consecutive missed instalments and when the outstanding loan balance exceeds one‑third of the hire‑purchase price.
In simple terms, repossession means the bank takes back your car to be used as collateral.
After two missed instalments, banks typically issue a default notice under Section 16 of the Hire Purchase Act 1967, giving you a chance to cure the arrears. If the arrears are not settled, repossession can follow and, by the end of the third month of non‑payment, repossession is often in motion unless a repayment arrangement has been made.
If you have already paid more than 75% of the hire‑purchase price, repossession generally cannot proceed without a court order.
Repossession agents are required to follow legal procedures, including identifying themselves and avoiding forced entry.
Repossession doesn't solve everything though. You may still owe money after repossession.
Many assume returning the car clears the debt, but that is not always the case.
Once the car is repossessed and auctioned, the proceeds are first applied to the outstanding loan balance, repossession and auction costs, and other agreed charges. If the selling price is lower than what you owe, you are still responsible for the remaining shortfall, plus related fees.
For example, if you still owe RM60,000 and the car sells for RM45,000, you could still be liable for RM15,000 plus fees.
When you miss car loan repayments, your credit record will be affected
Missed payments, default markers, and repossession can stay in your credit record and affect future applications for loans or credit cards.
Negative marks from overdue accounts or repossession can stay on your CCRIS and other credit reports for several years, influencing your ability to secure financing long after the situation has been resolved.
With that in mind, here's what you should do immediately if you lose your job and cannot afford your car loan
The first step is to contact your bank early. This increases your chances of getting some form of assistance, such as:
- Temporary payment relief or moratorium
- Loan restructuring to reduce monthly instalments
- Extended repayment tenure
ㅤ
These measures are at the bank's discretion and are usually considered only if you contact them proactively. Even a short buffer using savings can help prevent arrears from building up.
If repayments become unmanageable, borrowers can turn to Agensi Kaunseling & Pengurusan Kredit (AKPK) for free financial counselling
AKPK may help structure a repayment plan, especially if you are dealing with multiple debts. However, any changes to the hire‑purchase agreement, such as restructuring or moratorium, must still be approved by the bank.
In some cases, selling the car privately can be less damaging than letting it be repossessed
This is especially true when the vehicle's market value is close to, or higher than, the remaining loan balance. Even in cases of negative equity, a voluntary sale can help reduce overall losses, as repossessed vehicles are typically auctioned off below market value, often leaving the borrower with a larger outstanding shortfall to settle after the sale.
IMPORTANT: Be careful with "sambung bayar" arrangements
Informal takeover deals, commonly known as "sambung bayar", can be risky.
The scheme involves you allowing another person to "rent-to-own" your car by paying for your monthly instalments. However, this is illegal.
Even if someone else is paying, the car remains legally under your name unless the bank approves a formal transfer. If payments stop or issues arise, you are still responsible for arrears, repossession, and any shortfall.
All in all, losing your income stream may be tough, but your car loan does not stop
Early communication with your bank, exploring restructuring options, considering a private sale, or seeking help through AKPK can make a significant difference in how much financial damage you end up facing.
