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Hi All,

In couple of days i will be going to SBI-RACPC, Bangalore for pre-closing the car loan. Can any one tell me whom to contact in that office for this puspose ? Last time i went there, to submit RC copy, i had a tough time finding the fight person to give the documents to. Also, is it possible to close the loan in a single visit? I have a SB a/c with SBI which i can use to give a debit instruction or i can give a cheque.

Closed the car loan with SBI, got Form 35 and NOC. Just took 15 minutes. Smoothest experience so far with the bank so far.

Good news for all those looking to prepay their loans. This applies to car loans and home loans and those who have taken the floating rate option.


Source: Economic Times 7th September 2010

Now, Pre-pay Your Home & Car Loans Without Penalty

Floating rate borrowers won’t have to pay 3% charges

Pre-payment penalty on floating rate loans, be it for a home or a car, is set to come to an end, bringing relief to lakhs of customers who are forced by banks to pay as high as 3% of the outstanding loan amount when they seek to end indebtedness. “Banks must not recover pre-payment charges in floating rate loans,” the Reserve Bank of India said in a statement on the proceedings of Banking Ombudsman Conference. “Floating rate loans pass on the interest rate risk from banks, which are much better placed to manage it. Banks only substitute interest rate risk with potential credit risk.”
The levy of pre-payment penalty by banks was criticised since it deprives an individual the choice to end the debt burden. Banks have been using it to prevent customers from shifting loyalty and manage asset-liability gaps. A committee headed by former Securities and Exchange Board of India chairman M Damodaran suggested action to improve customer service, including a ban on the practice.

“RBI’s decision is a good thing since it will encourage people to settle their outstanding loans faster,” said Jehangir Gai, joint secretary, Consumer Welfare Association in Mumbai. “It is a hidden charge and banks do not disclose it to the consumer. ’’
The Banking Ombudsman Conference directed banks to come with a consensus view on the recommendations of the panel that could be implemented immediately.The Ombudsman scheme was introduced in 1995 to settle consumer disputes in an inexpensive way. “Banks should not impose exorbitant penal rates towards foreclosure of home loans and a policy should be devised to ensure that the customer is not denied the opportunity to enhance his economic welfare by making choices such as switching to other banks/financial entities to enjoy the benefits conferred by market competition,” the committee had stated.

Prepayment penalties vary from bank to bank. Usually it’s one (or a mix of) these:

• No prepayment penalty if borrower prepays from own source of funds

• No prepayment charges up to 25% of principal outstanding in first 2 or 3 years (specified by the bank). For any amount above this, charges are up to 2% on excess amount prepaid

• Prepayment penalty of 2-3% for any prepayment

Hi ShubhamAT,
I also have SBI car loan in Pune which i would like to foreclose today. I want to know the complete procedure you followed and the documents needed.
my loan was for 5 years, and i have completed 2.5 years already.

My EMI goes from my salary account in ICICI bank.

thanks in advance.
regards

Hi Nicky,

1. You need to visit the branch you have taken your loan from with following documents (in case you don't know call up RACPC and they will tell you):
-Original RC for verification
-Original Loan Document with folio no. written on it.
-SBI Passbook (if you have an a/c) for a direct debit.
- Photocopies of the first 2 documents (they may ask for it).
2. The car loan officer had a look at these documents and told me the amount due. I filled up a direct debit slip and immediately the loan was closed.
3. The officer then gave me 3 NOCs (one with a hologram) and also made me sign at few places.
4. I had given the PDCs which i was told to collect from RACPC. I have not collected these and EMIs are not being deducted any more.

Overall it took not more than 10mins from me walking in and coming out with NOC. I will suggest that if you have a SBI a/c use it to close the loan otherwise you will have to make one more visit to your branch to get the NOC (after cheque has cleared).

thanks a lot, this would be really handy. you saved my 1 day atleast.
I'll now carry SBI account passbook as i have account there (otherwise i was about to do it through ICICI cheque, which will take longer).
RC is a smart card in my case. i'll also carry a copy of it.

I have one query, SBI passbook: should it be updated to latest account balance? they want to see if i have enough money in account or it is just for verification that yes i really hold an account in SBI?

my passbook is actually not updated.

No need of an updated passbook. They use the account number to check for balance before asking you to fill the debit slip. Passbook is more for verification.

I too have a Car loan from SBI and would like to close it. But I dont have an a/c with SBI. Any idea, can I pay cash and close it immediately so that I don't have to visit the RACPC twice ? What documents should I carry in such a case?

Thanks in advance.

A DD should do just fine but i don't think they would like to handle cash. Any way you don't have to go to RACPC (in Basvangudi) to close the loan. Your loan would have been disbursed by a normal SBI Branch (St. Marks Rd in my case). With a DD/Cheque it would be some days before they give you a loan closure document. You can call them to check if they will take cash.

TIP: To make for faster processing get a DD from SBI by paying cash. Take PAN Card and it's copy (Just In Case) when you are to do cash transactions.

Hi All,

I need your help in the subject of pre-payment of the car loan and taking it again.

Scenario - I have sold my old car which was financed by HDFC Bank. Went to the bank to enquire the actual payment that I need to make to close the loan and also take a new loan. The Asst Manager informed me that if you take the loan again from HDFC Bank then I will not have to pay the complete 5% prepayment penalty instead something like 1.5% only.

He then told me that he will revert as to complete this he needs to take some approval from his superiors. I was really happy and asked him what is the Rate of Interest that I will get and other stuff. He said he will get back to me.

Now I wanted to know if anything like this does happen and did any one get a wavier in the prepayment charges as mentioned by the Asst Manager. Kindly confirm.

I am still awaiting his call to give me all the details. I will wait till tomorrow before I meet him again and remind him his words.

Regards,
Kailash

Have you tried other banks?

Nationalised banks seem to have the lowest interest rates and no pre-payment penalty.

Try Canara Bank and SBI

A quick Google got me these links;
SBI Car Loan
FAQs ON CANARA VEHICLE LOANS (FOUR WHEELERS)
bankbazaar.com

Hi,

The only reason that I am not trying the Nationalised banks like Canara Bank and others is because of the want of documentation. They take hell lot of time for documentation and you need someone who has account in these banks. All the current corporates do not have any accounts with these banks and hence I have no account in any nationalised bank.

Also SBI car loan is floating rate of interest which is really risky as they can increase the EMI and this can toss my working of the monthly budget. Anyways govt is hell bent on turning the life of us middle class to hell with our monthly budgets going haywire every month.

First of all, how did you manage to sell the car without closing the loan ? Isn't the car hypothecated to the bank during the loan tenure ?

And if I may ask, why are you buying and selling cars so frequently even though you are buying with loans ?

No offense meant with the above questions, I'm just trying to understand you situation.

Rohan

Some questions

1. Am assuming you have found a buyer for your car as you coulnd't have sold the car which is hypothecated and without removing HP from RC?

2. Parameters to evaluate should never be ease of documentation. Instead it should be benefits and cash outflow. But to each his own and I am not going to question it but just wanted to help you identify the right parameters

3. If you are willing to also get your new auto loan from HDFC then you should fight with them for waiving the *complete* pre-payment penalty. If they don't tell them you have better avenues after having done your home work. please:

Hope this helps