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-   -   Foreclosing an Auto loan - why the circus? (https://www.team-bhp.com/forum/indian-car-loans-insurance/96421-foreclosing-auto-loan-why-circus-3.html)

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).

Go with a nationalized bank which allows pre-payment and automatically reduces interest in case of pre-payment.
Then the extra 0.5% won't matter.
You can deposit a little extra in the months when you have savings, and your interest will keep getting reduced.

Why not try SBI? Their rate is 9% for first year and 10% for 2nd and 3rd year, 10.75% for 4th to 7th year. Have heard some people got loan from SBI in flat 5-6 days. And there is no pre-payment penalty for any loan in SBI.

Note - I have no commercial association with SBI. Just that I like their competitive rates on loans and deposits.

3 years back when I wanted to cancel my Reliance CDMA connection, they gave me a huge list of procedures to follow. Instead I simply requested for a change from post-paid to pre-paid connection after paying of the balance amount. Spent extra Rs10/- which was mandatory for pre-paid and then switched off the phone. No other extra charges and time saving.

Here is my experience. Had my car loan with SBI.
- Go to a branch for foreclosure
- Get the amount after waiting for over an hour (token system)
- Get ready to write cheque and then find out that if it is not a local SBI cheque then the interest will add on until the money is received and so the amount could vary
- Write a cheque anyway for the most part of the amount
- Come back again after the cheque clears with cash to close the remaining amount. This is really ridiculous as the balance is around 500.
- Wait an our to get the amount
- Go to another floor and wait for another hour to pay the cash
- Wait after that for a seal which is available with only one Manager
- Get the sealed receipt and then go to another branch
- Push and pull there to even get into the floor
- Show all the proof and then pray that you get the NOC the same day
- Thank your stars when you get it and walk away

Fun story for an evening with friends :)

I am a repeat customer for SBI. I like their no nonsense attitude and lower interest rates. My Jazz loan came in 5 days processed at a local branch. Processing center takes 10 days or more.

Only issue is they dont relax any documentation. If your papers/credit history is clear, SBI makes sense.

Try again. A lot of water has flown under the bridge since I took my car loan from HDFC last July, but I was able to negotiate a rate 1% less than the one on the website. 0.5% was due to me enjoying "classic customer" (or privileged or whatever) status and the other 0.5% was due to my extremely poor negotiating skills. I know people who could've arm-twisted them a little bit more. I even get a 50% waiver off the processing fees due to the relationship with the bank.

Later on (a month or so after my loan amount was disbursed), they introduced a scheme with 0.25% (or 0.5%) higher rates but absolutely 0 foreclosure penalties.

The final rate I got was 8.75% (or 9.03% if you remove the processing fees + stamp duty out of the equation). The base rates are much higher now, but if the website says 12%, you should be able to get 11.5% straightaway at a minimum on account of being a classic customer. Some cars attract higher RoI than others, though. I think the Linea is classified as a C-segmenter, which carries around 0.5% higher rates than for C+ (erstwhile D) segment cars.

That said, I've realized the beauty of a loan account. So if PNB is offering you a loan account (pay any amount any time without any penalties), go for it even if it comes with a slightly higher RoI. You can just dump spare cash into the account and negate the higher rate.

Regards,
spadix

I had no such experience while closing my ICICI Bank CAR Loan, it was single window process and took not more than 45 Minutes. Yes I was charged the pre-closure of 5%, negotiated to 4%. This was last year.

Hi Pavan, 2 questions:

1) Why only DD and not online banking or a cheque payment?
2) Why should it take 15 days for a DD to be encashed?

Same experience here wth ICICI. Late 2009 I foreclosed the autoloan of our Ikon. First step was calling the customer care. Next step visit a branch with papers. Withing 15 minutes the process is over. Paid some % preclosure fee, dont remember the value. In a week's time NOC was delivered to our flat. No complaints.

Thanks everyone for your comments. I have finalized on Tata Motor Finance today and initiated the process.

I needed the loan within a short timespan and PNB could not process it any earlier than next week (they had some audit going on or something)! They wouldn't give more than 75% of the ex-showroom price. And their processing charges were 7200 Rs. I did some quick calculations and found that either way it didn't have a big difference on pure financial terms. Also, I have decided to invest any surplus on other deposits for 2 reasons - possibly higher return on investment and better liquidity (just in case) :) So I guess I will not be foreclosing after all! So went for TMF.

I really liked the SBI scheme. But when I went to the local branch today it was way too crowded (almost like a crowded bus... well a little bit of exaggeration there, but almost similar :Shockked:). Also, had to wait quite a while to even meet the respective person. Plus, it seems they do charge 2% foreclosure penalty now! I would have still gone for it, if not for the processing time (about a week).

Spadix, I wish! They called me again today, but wouldn't come down from 11.75% and 4000 Rs. Processing charge. Not to mention their "strict" preclosure penalties (at least that's what they kept telling me!)

Even at Tata Motor Finance, they told me that once the loan term is completed, after about 15 days, I will have to go and show proof of last EMI paid (from bank statement) and then get the NOC. Not sure why the 15 day delay!

I just cannot understand why we are made to run around whenever we want to end any such relationship (credit card, bank account, loans, even SIM cards), the other day I wanted to cancel my Airtel postpaid mobile & the lady on the phone told me that I have to mandatorily give a reason for cancellation, i told her "When I took your mobile connection did you ask me why you needed a mobile phone, No, hence I need not give a reason for cancellation"

Because stock price of company is influenced by number of customers / subscribers. Thats why they have "retention" teams. Every loan termination / service discontinuation request goes though that team.

Perfomance incentives of this team are linked to numbers of customers retained, so they will try their best to get customer to cancel the request.

:OT Sorry, I couldn't help asking, but would it be more advisable to avail a loan against an FD rather than a straight-up standard car loan? Does the concept of foreclosure penalty come into picture there at all?

Pardon my ignorance, but I would appreciate some good advice around this.

This has been discussed elsewhere on the forum. Loan against FD is better in many aspects, E.g. no RTO formalities (For hypothecation) and no fees for foreclosure.