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Old 22nd February 2011, 13:31   #46
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Default Re: Foreclosing an Auto loan - why the circus?

The bank has rejected my check "DRAWER SIGNATURE DIFFERS".
This is downright idiotic. Now I have to go again and repeat the same circus again. I have had enough of HDFC, this is the last time I am taking any loan from them!
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Old 23rd February 2011, 01:39   #47
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Default Re: Foreclosing an Auto loan - why the circus?

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Originally Posted by cssrk View Post
This thread couldn't have been more timely for me. I just booked a Fiat Linea MJD (yesterday) and am looking out for loan options.

I'm a classic customer (not that it means anything to me!) at HDFC and they provided me a "special" interest rate of 12% (which seems to be for everyone, as it appears on their website). And the agent even after repeated request (and after speaking with his so called higher "authorities") wouldn't budge on the foreclosure penalty or even the interest rate!

I'm currently looking at two options - Tata Motor Finance (available at the dealer) and Punjab National Bank (I know someone there).
TMF - 11% fixed. Foreclosure penalty - 4% (might be waived a little - 2.5 - 3% depending on the time of closing and NO part prepayments allowed!)
PNB - 12.5% floating. Flexible part prepayment, NO penalty on foreclosure or part prepayment.

After reading the replies, wondering if I should just go with PNB in-spite of the higher ROI (Got to finalize by tomorrow).

None of the nationalized banks penalize on foreclosures. Even RBI is quite against it (though they haven't yet passed any rule against it!). It just seems an unethical banking process (at least to me).
Dear Shiva,
I want to share my experience with SBI, retail loans, Anna Saalai, Chennai. I booked my Linea MJD in Sep 2009. When Concorde recommended SBI, I was very apprehensive. But after interacting with SBIs rep or loan agent, Mr Raghunathan, my entire out look changed. First, he got the loan approaved within two days as he promised. Second, he arranged for the cheque to be issued on the third day. Of course, I had to go to Anna Saalai Retail loan division, opposite Spencer to collect the cheque. Some unavoidable waiting time and jostling was there. But second visit was not required. I got the cheque same day. So loan processing start to getting the cheque was about three days, excluding a holiday in between.
Thereafter comes the foreclosure part, which I did in 2010 May or so. I again contacted Mr Raghu, Cell no. 9444034532 and explained him my requirement. He asked whether I can visit the Ambattur SBI branch where my loan was registered. I said no since it is far off. Then he himself contacted the manager, got the statement and e mailed the due amount to be paid. He also wanted me to check whether the dues were correct. I sent him the cheque by courier. After it was credited, again he called me up and said that the formalities were done. After another day he e mailed me the scan copy of closure letter. After another day I got the original by courier. I could not believe that I was dealing with SBI! Hats off to Raghu and SBI retail loans. Not only that, I also received a cheque few days later crediting some excess amount collected.
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Old 27th July 2011, 19:19   #48
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Default Loan interest rate goes up higher - wise to close car loan sooner

I have my car loan taken from the State Bank. Its been almost two years and two more years to go. It was the one year 9% interest when i had taken the loan. After the first year, it became floating and now with the latest hike by RBI, the percentage stands at 13.5%. There are no pre-closure charges. Am wondering if I should just close out the loan given this high interest.

Would like to hear from the others in the forum on the good and bad of such a move. What are you planning to do given this rate hike?
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Old 27th July 2011, 20:24   #49
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Quote:
Originally Posted by vista_qjd
I have my car loan taken from the State Bank. Its been almost two years and two more years to go. It was the one year 9% interest when i had taken the loan. After the first year, it became floating and now with the latest hike by RBI, the percentage stands at 13.5%. There are no pre-closure charges. Am wondering if I should just close out the loan given this high interest.

Would like to hear from the others in the forum on the good and bad of such a move. What are you planning to do given this rate hike?
I don't know your tax status (professional v salaried v business). If you're not getting any tax benefits from the interest and assuming you're salaried, I'd say prepay any day if you have the cash.

If you can use interest as expense on books then you need to consider any associated tax benefits.
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Old 27th July 2011, 20:43   #50
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Default Re: Loan interest rate goes up higher - wise to close car loan sooner

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Originally Posted by vista_qjd View Post
I have my car loan taken from the State Bank. Its been almost two years and two more years to go. It was the one year 9% interest when i had taken the loan. After the first year, it became floating and now with the latest hike by RBI, the percentage stands at 13.5%. There are no pre-closure charges. Am wondering if I should just close out the loan given this high interest.
Car is a depreciating asset. It does not make economic sense to pay even more for depreciating assets. I'd advise you to pre close the loan as soon as possible. If you don't have surplus cash but have existing FD's you can get an overdraft which can be used to pre-close the loan. Interest rate against FD is much lower than car loans.

If you derive income from business, then you can claim depreciation benefits but do weigh the extent of depreciation vs. interest outgo to decide which is best for you.

Hope this helps
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Old 27th July 2011, 20:43   #51
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Default Re: Loan interest rate goes up higher - wise to close car loan sooner

As a slaried person I find it ridiculous to go for a car loan. The minimum rate you can expect is 8%. Now the loan will only make sense if you make some investment with the money which yields more. And even if it does what about taxes on the interest earned, that too if you are in the highest slab.

For a businessman there are enough reasons to go for a car loan.

My advice if you are a salaried person close the loan if possible.
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Old 27th July 2011, 20:56   #52
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Default Re: Loan interest rate goes up higher - wise to close car loan sooner

Quote:
Originally Posted by vista_qjd View Post
I have my car loan taken from the State Bank. Its been almost two years and two more years to go. It was the one year 9% interest when i had taken the loan. After the first year, it became floating and now with the latest hike by RBI, the percentage stands at 13.5%. There are no pre-closure charges. Am wondering if I should just close out the loan given this high interest.

Would like to hear from the others in the forum on the good and bad of such a move. What are you planning to do given this rate hike?
My opinion:

I expect you are tryong to close the loan by breaking some FDs. FDs now attract interest rates around 9.5% flat, while your loan interest rate of 13.5% (diminishing) means it is around 7.5% flat, which is still lower than 9.5%. Am I wrong?
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Old 27th July 2011, 21:07   #53
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Default Re: Loan interest rate goes up higher - wise to close car loan sooner

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Originally Posted by romeomidhun View Post
My opinion:

I expect you are tryong to close the loan by breaking some FDs. FDs now attract interest rates around 9.5% flat, while your loan interest rate of 13.5% (diminishing) means it is around 7.5% flat, which is still lower than 9.5%. Am I wrong?
Never thought about it. The interest rate tab just says 13.5% currently, so I assumed it is flat 13.5%, maybe i am wrong. And yes the FDs are at 9.5% now, which are pretty good rates. I guess if it is diminishing rate I might as well hold on to them.

The other part about closing out on a car loan is that you start looking to change the car once the loans are paid up ... :-) ... more a psychological factor I guess
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Old 27th July 2011, 21:38   #54
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Default Re: Loan interest rate goes up higher - wise to close car loan sooner

A similar discussion is already going on in Team-BHP:

http://www.team-bhp.com/forum/indian...-deposits.html (Car Loan against Fixed Deposits)

I just can say,
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Old 27th July 2011, 21:42   #55
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Default Re: Loan interest rate goes up higher - wise to close car loan sooner

You might also want to look at other loans (if you have any), that have higher interest rate than the car loan.
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Old 28th July 2011, 10:18   #56
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Default Re: Loan interest rate goes up higher - wise to close car loan sooner

Can sombody point out whether there is floating interest on the car loans ? So far i have never came across anything such,

However you cannot save any tax on car loans !!!

Tax saving can only be done when your car goes on a lease with the company.
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Old 28th July 2011, 10:29   #57
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Default Re: Loan interest rate goes up higher - wise to close car loan sooner

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Originally Posted by tabrez02 View Post
Can sombody point out whether there is floating interest on the car loans ? So far i have never came across anything such,

However you cannot save any tax on car loans !!!

Tax saving can only be done when your car goes on a lease with the company.
Yes there is. State Bank group banks always offer Car loan at floating interest rate. They do not offer it at fixed rate.
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Old 28th July 2011, 10:38   #58
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Default Re: Loan interest rate goes up higher - wise to close car loan sooner

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Originally Posted by oxyzen View Post
As a slaried person I find it ridiculous to go for a car loan. The minimum rate you can expect is 8%. Now the loan will only make sense if you make some investment with the money which yields more. And even if it does what about taxes on the interest earned, that too if you are in the highest slab.

For a businessman there are enough reasons to go for a car loan.

My advice if you are a salaried person close the loan if possible.
I am a salaried person and I have a car loan. As far as I know, 80% of the cars sold are purchased with loans and not all of them are businessmen. It does make a lot of sense considering that the car is a depreciating asset. There is no point is spending 10 lacs upfront and buying a car. Currently those with floating rate interests might be feeling the pain but that can change in a few months.

Nobody is going to keep his money idle in a current account or savings bank. My car loan is at a fixed 8.5% for 3 years and I have surely benefitted by being able to invest money in stocks and even regular bank deposits where the interest rate is above 10% now. I will not even think of closing my car loan even if I have enough cash with me.
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Old 28th July 2011, 11:16   #59
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Default Re: Loan interest rate goes up higher - wise to close car loan sooner

I wouldn't advise closing the car loan especially since you have finished 2 years/4 year loan tenure. Why, because most of the interest payment in a loan is upfront and post that is usually principal payment. Do check in your loan details as to how much interest you would be saving by pre-closing, and only if that interest is significant i would recommend closing it otherwise i don't see any advantage.
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Old 28th July 2011, 12:26   #60
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Smile Re: Loan interest rate goes up higher - wise to close car loan sooner

If you are a salaried person and have some surplus funds then you should go ahead and close the loan. The EMI amount which you will save if invested in other investments might yield you more return than the present surplus investment (read FD).
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