The most common type of loan offered by the banks in Malaysia, whereby the interest rate is pegged to the Base Lending Rate (“BLR”). If the BLR increases, the applicable interest rate will naturally increase accordingly and vice versa. The interest rate varies throughout the term of the loan.

Most standard variable rate loans offer very low interest rates for the initial term to attract borrowers. The Honeymoon Interest Rates do not last and will revert to the standard floating rate (ie BLR + Spread) after the first and/or second year, which may be costly in an increasing interest rates environment.

Some standard variable rate loans offer different floating rates over different periods of the loan (ie, BLR + 0.5% for 3^rd to 5^th year, BLR + 0.3% for 6^th year to 15^th year and thereafter BLR + 0%).

Some new variable rate loan has a maximum capping on the rate of interest. Banks and some financial institutions have started to introduce such loan packages, where the interest rate is pegged to BLR but yet cannot exceed a capped maximum interest rate, ie Islamic loans with variable interest rates.

:: Pros

• When interest rates fall, repayments fall
• You enjoy very low interest rates during the initial years
• May allow prepayments (subject to conditions)
• May have redrawing features (subject to conditions)

• When interest rates rise, so do your repayments