Team-BHP - Foreclosing an Auto loan

I'm thinking about foreclosing my car loan with ICICI bank. The intrest rate is 10.75 fixed for 60 months. I have paid 23 out of 60 EMIs. With the current outstanding of 811854₹ and a foreclosure penalty of 5% and adding a simple intrest for 16 days, I can calculate that I save about 102000₹ in intrest. I had almost made up my mind that I will close the loan when I get back to india, but it just struck me that if I simply keep that money in a FD, even with a minimum of 7.5% returns after taxes, I can earn 221000₹ in 39 months.
Now I'm confused if it makes financial sense to actually close the loan or to keep it going.
Please tell me if I'm missing something here or is my calculation financially sound.
Any advice will be helpful.
FYI: no tax benefits for me from keeping the loan.

Finally took the plunge day before yesterday. Found out the most convenient ICICI loan branch for myself by calling customer care, put the location in Gmaps and reached there in 45 minutes. Took a coupon and waited 5 mins. Got to the counter and found out the amount to be paid to close the loan. Had to pay 5.7% penalty on outstanding plus the simple interest for the month. The penalty is actually 5% of the outstanding, but adding the service tax, it comes to 5.7%. Tried to negotiate the foreclosure charges, threatened to withdraw my existing deposits with icici bank, but was bluntly told that it will not be reduced no matter what I did:Frustrati
Took my cheque book out and filled out a cheque and handed it over, and was out in 15 minutes.
Got a confirmation yesterday morning that the cheque had cleared, rushed to my bank and canceled the ECS instruction. Finally managed to close a 5 year loan in less than 2 years clap:

I foreclosed the loans on my Rapid and Celerio with Corporation Bank. No forms to fill. No going to any other branch, no pre-closure penalty. Just transferred the amount from my account. Just need to go and collect the letter for removal of hypotecation. But I'll do that whenever I go to get address changed on my RC.

Quote:

Originally Posted by msk016 (Post 3783205)

Keep the loan. I'd suggest you invest the amount in mutual funds if not directly in equity. Better than the FD option. And stay invested for 3-4 years

Quote:

Originally Posted by drsingh (Post 3790649)

Keep the loan. I'd suggest you invest the amount in mutual funds if not directly in equity. Better than the FD option. And stay invested for 3-4 years

Thanks for your advice, but I decided to pay off the loan. I was saving some money on the interest payable. The bigger reason for making the decision was to create some space for another property loan.

Guys, hope someone can help me here.

My cousin has a Honda Mobilio on a 7 year loan. He's just into a year's payment and now he's suddenly wanting to sell the car. Can he sell the car and what are the formalities?

Can he advertise it online and how can he determine the resale price? Or does he have to inform the bank first and pre-close the loan and then advertise? I've been trying to help him but with zero knowledge of the procedures involved, I'm stumped. Someone help me, please! Thanks.

Quote:

Originally Posted by swiftdiesel (Post 3858483)

The resale price can be determined from the used car market in the seller's town.
It would be easier if the seller pre-closes the loan and sells. Then the seller can pocket all the sales proceeds. The hypothecation deletion cost may be deducted from the proceeds by the buyer.
If that is not possible, find a buyer through ads or otherwise and inform him of the loan.Then the seller goes to loan bank with the buyer and arranges for the buyer to pay off the loan and bank will give NOC in the buyer's name. Buyer pays the balance of the negotiated price minus loan amount to the seller.

Quote:

Originally Posted by techiecal (Post 3858693)

Atleast in the case of HDFC, I was told recently the account through which you make the balance payment has to be in the borrower's name. So the buyer can't pay off the seller's loan unless he transfers money first.

Quote:

Originally Posted by sharninder (Post 3916216)

Well,that's a first by HDFC. There seems to be no reason why the balance of the loan cannot be paid by DD instead of through an account. Usually the buyer provides the DD to foreclose the loan.

I think the heading should be corrected. Is this thread related to pre-closing a loan?
Well foreclosure has a different meaning. Here is a Wikipedia explanation-
Foreclosure is a legal process in which a lender attempts to recover the balance of a loan from a borrower who has stopped making payments to the lender by forcing the sale of the asset used as the collateral for the loan.

Closed my 3 year old SBI loan today. Since amount was below 50k, I paid by cash. Easy peasy- provide loan no in deposit challan, deposit the requisite amount. Go to the person who would provide the loan termination certificate. In my case it was the branch astt manager. He will provide you the original certificate and a copy. The original has a hologram. All done in 20 mins.

Quote:

Originally Posted by tsk1979 (Post 2240073)

I am not sure what is the case with other banks, but in case of HDFC bank, the procedure is stone age.

Recently foreclosed with HDFC and the process was very smooth.

1. Call phone-banking or write to loansupport@hdfcbank.com with all details; they'll send a statement with the foreclosure amount.

2. Send cheque to the HDFC branch (even authorised representative can go).

3. Once the cheque clears, I wrote to the said email address again for confirmation that loan account has been shut & no further EMIs will be deducted. They replied in the affirmative.

4. In 5 - 7 working days, I received the NOC & loan closure letter.

In about 8 days, they even refunded 8k back as I'd paid them immediately (and they calculated amount based on a future date).

Hey Rush: Thanks- did you have to pay any foreclosure charges? HDFC, unfortunately, are notorious with these- I had to pay them twice selling 2 cars, with the former sold over 3 years into the loan tenor whilst the latter in a year( notwithstanding the branch stated they'd waive off the 5% charges if I went for another auto loan).

We make it a point that the foreclosure agreement is mended. The change that we ask for is that if we foreclose a loan with our own funds then there will be no foreclosure charges.
Charges will only be for transferring loans to another bank/financing body. Till date all banks have agreed to this clause irrespective of type of loan.