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28th July 2011, 16:37 | #61 | ||
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| Re: Foreclosing an Auto loan - why the circus? Quote:
I took my car loan again with SBT and was disbursed to me in 2 days flat. I am happy with nationalized banks than the private players. Quote:
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29th July 2011, 00:52 | #62 | |
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| Re: Loan interest rate goes up higher - wise to close car loan sooner Quote:
a. Hope your FD now attracts an interest of 9.5% and not less. If not, close it and reopen with the current higher interest rate for a period more than the remaining period of the existing FD (to avoid pre-closure penalty), and a period not less than the remaining installments of your current car loan (not to over-burden your budget). b. Get the OD at a rate of 11.5% (9.5% + 2% = 11.5%) diminishing, (which means roughly 6.5% flat!) and close the car loan. (For State Banks, the OD interest rate is 2% more than your FD interest rate. For some other banks, it may be lower.) But remember one thing - our calculated OD interest rate of 11.5% will act as a diminishing rate only when you repay the OD as EMIs just like you repay your current car loan. Otherwise (if you don't repay the OD as fixed monthly installments), the 11.5% will act as a flat rate for the whole amount of OD, and you will end up paying much more than even your current car loan amount (11.5% against 7.5%)! Last edited by romeomidhun : 29th July 2011 at 01:09. | |
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29th July 2011, 11:48 | #63 | |
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| Re: Loan interest rate goes up higher - wise to close car loan sooner Quote:
If we repay the OD as EMIs, the whole amount will be deducted from the principal amount! (That means, it is unlike usual loan EMIs where the EMI amount is towards partial principal and partial interest.) So, the 11.5% interest rate for the OD actually amounts to just 5% flat rate, and not the above mentioned 6.5%! | |
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29th July 2011, 13:22 | #64 | |
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| Re: Loan interest rate goes up higher - wise to close car loan sooner Quote:
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29th July 2011, 15:31 | #65 | |
Senior - BHPian | Re: Foreclosing an Auto loan - why the circus? Quote:
Also pre-closed my earlier loan with Citibank. Although i was asked to go to their collection branch on MG Road but the process was smooth and quick. On the counter the lady told be actual amount to be paid, i cut the cheque and she gave me the receipt. I got full settlement letter in 2-3 days post cheque was cleared. | |
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31st July 2011, 16:03 | #66 |
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| Re: Foreclosing an Auto loan - why the circus? Just pre closed my Car loan yesterday. That was with Syndicate bank at the rate of 8.5% first year, 9.5% the next and 10% fr the next 3 years. Got lucky with bonuses, mfs and wife's M, and was able to repay the entire 3.5L in 9 months In all, I had to pay 3.81L for my 3.5L loan as the first 9 installments were mostly the interest. And what a breeze, getting the loan and repaying was no problem at all. Yes I had to visit the bank on 4 occasions [2 for getting the loan and 2 for closure], but after having my account in the same bank from my 5th standard days, it was no problem at all. Spend a little of your saturday morning and all is done. My suggestion: Always go for nationalized banks. They charge lesser rate of interest Zero % preclosure charges Transfer money every month from your salary account to the loan bank account. This would cost nothing as well. No visits to either banks. Even if you miss an installment, these banks are not very harsh. [My friend had a loan which he was not able to pay for 2 continuous months, and guess what, very little penalties] In a hurry to book your car (Color, limited availablity, month end price rise etc), and lack of time to visit the bank, dont fall into the Private bank traps. Its worth the extra effort, and personal visit to the loan manager really helps. |
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2nd August 2011, 13:38 | #67 | |
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| Re: Loan interest rate goes up higher - wise to close car loan sooner Quote:
Suppose you have Rs 5L in your fixed deposit (FD) that attracts 9.5% interest. Also suppose you are considering a span for 3 years. At the end of 3rd year, your FD will become Rs 6.6L approximately. Now you want to buy a new car which costs 4.5L. You dilemma would be: 1) Whether you need to close the FD, and pay the full amount of 4.5L in cash and get the car. (Rs 50k still in FD). 2) Go for a new car loan that attracts 13.5% interest rate (in vista_qjd's case above). (Here, assume you pay Rs 50K as cash and get the remaining 4L as loan for your car). (Rs 4.5L still in FD). 3) Get an overdraft (OD) of 4.5L against your FD (usually you will get 90% of the FD as OD), pay for the car, and repay the OD as EMIs for a period of 3 years. In case 1, by the end of 3rd year, you will have a total of nearly 70K in FD. (Lost Rs 5.9L because you broke the FD and lost its interest also). In case 2, your FD of 4.5L will become nearly Rs 5.9L by the end of 3rd year. But you need to pay Rs 4.9L as loan repayment for this period (EMI: nearly Rs 13.5K for the amount of Rs 4L). (That means a flat interest rate of 7.5%). So you can have Rs 1L (5.9L - 4.9L) in hand by the end of 3rd year. So, compared to case 1, you have saved Rs 30K (1L - 70K) by the end of 3rd year. Now consider case 3. Your FD of 5L will become nearly Rs 6.6L by the end of 3rd year. OD interest rate will be usually 2% higher than FD rate. Also, ODs are not really needed to be re-payed as EMIs. But, you must repay it as EMIs by your own. Here, at a rate of 11.5% (9.5% + 2%), you have to pay nearly 5.4L as total EMI (of nearly Rs 15K) for the period of 3 years for an OD of Rs 4.5L. That means you can have Rs 1.2L (6.6L - 5.4L) in hand by the end of 3rd year. So, compared to case 1, you have saved Rs 50K (1.2L - 70K) by the end of 3rd year. Still, case 3 is the better option. Now the twist in case 3: In usual loans, the EMI consists of 2 parts - principal and interest. That means, whatever you pay as EMIs each month, will not be fully deducted from the principal, but some portion will go into the interest. But in case off OD repayment, the entire amount of repayment as EMI will be deducted from the principal, and from next month, interest will be calculated for the remaining amount only. Interest will be calculated at the end of the period only. Calculating like this, for an OD of Rs 4.5L, the total repayment will be Rs 5.2L (that means a flat interest rate of nearly 5%!). That means you can have Rs 1.4L (6.6L - 5.2L) in hand by the end of 3rd year. So, compared to case 1, you have saved Rs 70K (1.4L - 70K) by the end of 3rd year. Am I wrong somewhere? Last edited by romeomidhun : 2nd August 2011 at 13:41. | |
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2nd August 2011, 16:07 | #68 |
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| Re: Foreclosing an Auto loan - why the circus? The above calculation is made in the assumption that new car loan rate is 13.5%. If you get a car loan for an interest rate less than or equal to 9%, that will give you better gains than any situation mentioned above, IMO. Last edited by romeomidhun : 2nd August 2011 at 16:08. |
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5th August 2011, 13:01 | #69 | |
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| Re: Foreclosing an Auto loan - why the circus? Quote:
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5th August 2011, 14:54 | #70 |
BHPian | Re: Foreclosing an Auto loan - why the circus? Circus? Read on, and you will call it a carnival of clowns. I owned a Bolero (2009), which got stolen in Feb 2010. Loan was through Axis bank, insurance with United India Insurance (Panvel). After 17 months of the theft, I was able to wrangle the insurance claim disbursement from UIIC. I was issued a settlement intimation voucher from the insurance co, which I had to get stamped from Axis bank. Remember, the insurance company is in Panvel, and the Loan dept of Axis Bank in Fort, Mumbai. Instead of wasting a day for the courier delivery of the voucher, I went there personally. Then on a Saturday, I went to the bank, got the voucher stamped. I was told that a person from the bank will bring the original voucher on Monday to the insurance company, where I must be present, and together we will collect the cheque from the insurance company manager. God alone knows why. So on a Monday, I bunked work, borrowed a friend's Alto, drove from Thane to Panvel to reach the insurance company by 11:30 AM. At 11:25, someone from Axis calls me and tells me that the person they were supposed to send will not come today. This, after I had them confirm on Saturday itself. After much cajoling, conning, threatening, I was able to force that chap to get on a train and come to Panvel asap. This took 3.5 hours, during which time, I had lunch, twiddled my thumbs, tanked up the Alto, filled air, had a couple of chats with the insurance company manager etc. Finally the bank guy turns up, we collect the cheque, only to be told that a second signatory also needs to autograph it. Drove the bank guy, insurance clerk and myself in the alto to CBD Belapur, where the second signatory signed the cheque. I handed the cheque to the bank guy, told him to go away. The insurance clerk happily left for home, which was a couple of minutes away. I had a couple of pics of the cheque to ogle at, and drove the Alto back home. At 7:45 PM. On a Monday (25 July 2011). I was told by Axis bank that in 3 days time they will issue the balance amount DD in my favour, and I could either collect it from the Fort branch, or they will courier it to my home. I have been following up with the Fort branch, who told me on Thursday evening (28 July) that the cheque cleared in the bank's favour. About 80% of the money is due to me, the rest will cover my outstanding loan amount. I was then informed that until the loan account is closed, the DD will not be issued in my favour for the balance money due to me. Apparently the initial 3 day period that they told me, was a lie. Either that, or I misheard them on two occassions, once over a phone call, the other when I met them face to face. Now, each time I call them and ask them the status, the same person tells me that it will take 2-3 days to close my loan account. After which the DD will be issued. Counting from Last Friday, it has now been 5 working days that Axis bank have been enjoying interest from my money (~3.8 Lakh INR). And it is likely to continue for... you guessed it.. 2-3 days. Don't you love that phrase. "Sir, maine aapse kal bhi bola tha na, do-teen din lagenge, uske baad mai khud aapko call karoongi". There was only one thing I could do, stop being an Axis customer. So I did it. On Monday (Aug 1) I applied for an HDFC bank car loan. On Thursday, HDFC have approved it. Tomorrow(saturday) I am paying the downpayment for a new Ford Figo Titanium Tdci. It would have been very useful if Axis bank had atleast given me the DD this week, as they had promised. I would have been better placed financially, and the added breathing room would have kept me stress-free. Funnily enough, if you miss an EMI, they will charge you a penalty and interest without question. But if they delay a payment and eat interest not due to them, chalta hai? Apologies for the rant. Some bitterness is allowed in my case, I presume. |
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5th August 2011, 15:08 | #71 | ||
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| Re: Loan interest rate goes up higher - wise to close car loan sooner Quote:
Quote:
In case 1, we need to consider the extra interest that we get when we are not paying any EMI. So, reworking the cases 1 and 'actual' 3 - which are the 2 main cases of consideration here - once again: Suppose you have Rs 5L in your FD that attracts 9.5% interest. Also suppose you are considering a span for 3 years. At the end of 3rd year, your FD will become Rs 6.6L approximately. Suppose you earn Rs 50K monthly. After 3 years, you will be richer by Rs 20.8L (Rs 50K * 36 = 18L, plus interest earned at the rate of 9.5%) in your recurring deposit (RD) assuming you are saving the whole amount. Now you want to buy a new car which costs 4.5L. Case 1) Close the FD, and pay the full amount of 4.5L in cash and get the car. (Rs 50K still in FD). Case 2) Get an OD of 4.5L against your FD, pay for the car, and repay the OD as EMIs for a period of 3 years. In case 1, by the end of 3rd year, you will have Rs 70K in FD. So, you will be richer by nearly 21.5L (70K in FD + 20.8L in RD) at the end of 3rd year. In case 2: At an interest rate of 9.5%, your FD of 5L will become nearly Rs 6.6L by the end of 3rd year. Here, OD interest rate will be 11.5%. Also, you must repay it as EMIs. Since the entire amount of repayment of OD as EMI will be deducted from the principal, for an OD of Rs 4.5L, the total repayment will be Rs 5.2L (So, your repayment per month should be Rs 14.5K (5.2L / 36 = 14.5K). At Rs 35.5K monthly (50K - 14.5K = 35.5K), you will have Rs 14.78L (Rs 35.5K * 36 = 12.78L plus interest earned at the rate of 9.5%) in your RD by the end of 3rd year. In total, by the end of 3rd year, you will be richer by Rs 21.38L (6.6L in FD + 14.78L in RD). That means, compared to case 1, you may actually lose Rs 12K (21.5L - 21.38L) by the end of 3rd year! Last edited by romeomidhun : 5th August 2011 at 15:13. | ||
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5th August 2011, 15:19 | #72 |
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| Re: Foreclosing an Auto loan - why the circus? friends, i am having a loan of Rs 7lacs taken from SBH bangalore at 13.5% interest rate - floating in the month of March 2011.EMI is 16000rs for 60months and i have paid EMI from April to August 2011.Now i have got a cash of @ 6.5Lacs by selling a property, is it wise to close the auto loan or should i put as FD this cash as my bank is offering @ 9.5%.Please help to sort out, as i need to take a call, else end of the day money also will not be there and loan will be still open |
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5th August 2011, 23:16 | #73 |
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| Re: Foreclosing an Auto loan - why the circus?
It is always wise to close out all liabilities with higher interest compared to cash deposits earning lesser interest. |
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10th September 2011, 15:30 | #74 |
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| Re: Foreclosing an Auto loan - why the circus? This is a great thread. Many people who take loans might want to foreclose them down the line and not know the hassles that await them. I have my salary account with HDFC and was actually thinking about getting a car loan from them (first choice) but after reading these experiences, I might stick with nationalised banks. I actually visited a local SBI bank on a rainy morning and was told that loans upto 6 L are approved by Branch manager so its faster compared to loans above 6 L which could take few more days for processing. With no foreclosure charges, speedier loan processing compared to years ago, interest rate at par or better than private banks and less hassles during foreclosure, it makes sense to go for nationalised banks. (another lesson learned - visit nationalised banks when its raining - the little inconvenience is offset by less crowd) I just hope one day we can open/close our accounts sitting at home just like I have done in US - no questions asked for bank account closures and the balance sent via cashiers cheque to home address. For my car loan foreclosure in US, I just had to mail them the cheque for balance amount and the documents were sent to home - no need to leave home! I am comparing apples to oranges here but hopefully some day everybody in service industry over here will also truly be customer focussed. BTW - the calculations on the various options are very interesting. It would be more realistic if the tax component on interest earned on FDs is also included (for option 2/3) along with the interest earned on the EMI payment amount (for self-pay case-option 1) OT - The internet banking site of HDFC is just basic. I don't have an ATM card and I cannot apply via phonebanking or netbanking. I have to visit the branch, fill up a tedious form just to apply for an ATM card for my account (and the information counter fellows did not even know that ATM card without a MasterCard/Visa logo & no fees is different than Debit card which has MC/Visa logo and is charged annual fee for traditional savings account!! - I had to actually show them my RBS bank ATM card without any logo and my HDFC credit card with logos for comparison to make them believe that ATM cards come without logo also). There are more things you can do from Citibank India netbanking compared to HDFC's netbanking. |
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10th September 2011, 20:06 | #75 | |||
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| Re: Foreclosing an Auto loan - why the circus? Quote:
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Every VISA card that is issued, counts towards "sales" target of branch staff. Thats why they dont want to issue plain ATM cards. | |||
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