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    Prepayment Conditions for Car Loans

    More than often, people avail car loans to fuel their dreams of owning an automobile because a one-time purchase like a car, could burn up their savings. When finances look up or if there is a sudden influx of money, it is wise to end the debt. In simple terms, prepayment or foreclosure means the satisfaction of debt before the end of tenure.


    People usually look to prepay the loan because it not only offers interest savings but also lets them avail other loans easily. But, there are certain factors that you must consider before you decide to prepay a car loan. Read on to find more about car loan foreclosure and its impact on your finances.

    Car Loan Prepayment Penalty

    If the borrower pays the loan amount well before the pay-off date, he is charged a certain penalty by the bank. Because the lender does not get the anticipated interest, the penalty usually acts as a compensation. The car loan foreclosure penalty amount depends on the principal outstanding, interest outstanding and also at what point of the tenure the loan is being paid off.

    Prepayment and pre-closure could mean differently when it comes to penalty charges. Prepayments can be done in parts and pre-closure means foreclosure of the entire loan before end of the tenure. It is important that you are well-informed about the prepayment clauses and penalty charges before applying for a loan with a particular bank.

    How do I calculate Car Loan Prepayment Charges?

    Sometimes, prepayment can work to your advantage and sometimes not. For example, foreclosure of a car loan towards the end of tenure may not be favourable because the prepayment penalty may exceed the interest to be paid towards the loan. You can use an online car loan prepayment calculator to check your prepayment penalty based on the principal outstanding amount.

    In a car loan prepayment calculator, you will have to enter details like the original loan amount, start date of the car loan, tenure, rate of interest and prepayment penalty. Some calculators will ask you to input the number of months left to pay back the loan and current EMI. Based on the information that you have provided, the car loan prepayment calculator will project by how much your principal balance is lowered, the interest savings and also the number of months by which the repayment term is shortened.

    This information will help you make a wise decision when it comes to prepaying a car loan. In short, if the interest savings is greater than that of the penalty, you can proceed with the car loan foreclosure.

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    Two Types of Car Loan Prepayment

    When it comes to car loan foreclosure, there are two broad types – part and full.

    • Part prepayment: When you are paying off a part of the car loan by making larger payments than the EMI, before the end of the tenure, then it is called part prepayment. By this, your principal outstanding will be reduced and also the EMI.
    • Full prepayment: When you are paying off your loan entirely before the end of tenure, it is called full prepayment. It is equal to closing off the loan.
    • Some banks do not allow prepayment in parts for car loans. Also, make sure that you are informed about the new repayment schedule after you do a part prepayment.

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    What is the procedure for Car Loan Prepayment?

    Follow the points below to know the procedure for car loan prepayment.

    • If you decide to foreclose your car loan, it is advised that you read the bank’s loan document carefully. Some banks do not allow prepayment of car loan for at least a year after the loan is availed.
    • Once you are clear about all the foreclosure clauses, contact the bank directly. You may be asked to fill in a form for foreclosure. The penalty fee (if any) can be paid through ECS, cheque, drafts and also NEFT.

    Should you prepay your Car Loan?

    There are certain pros and cons to foreclosure that one must weigh carefully before deciding to pay-off the car loan. Here are some of the points that will help you decide on foreclosure.

    • Savings on Interest

      Borrowers should consider the prevailing interest rate for car loans rather than the tenure when it comes to prepayment. Whether or not to close your loan is influenced by factors like the stage of payment you are at, the prepayment penalty and the interest rate.

    • Foreclosure Charges

      The penalty for prepayment vary from bank to bank and is dependent on many factors. The car loan prepayment penalty can be charged as a flat rate or as a percentage of interest or principal outstanding. Borrowers must compare the penalty amount against the overall interest savings.

    • Consider all Options

      Though it is a wise decision to pay-off your loan, you must make sure that the money is being put to good use. If you could invest the money somewhere and gain better profit than all interest savings that come through foreclosure, why choose to prepay the loan?

    Prepayment Conditions for Car Loans Reviews

    • Bank Bazaar Car Loan
      "Good service"
      0.5 5.0/5 "Blown Away!"
      I came to know about know about Bank Bazaar through online. I have started using Bank Bazaar.com for many more months .I am not regular customer of this website. The website is very easy to use of bank bazaar . Bank bazaar it is very good services and during application time also the process is very hassle free .
      Was this review helpful? 0
      , agra
      Reviewed on Mar 25, 2019
    • HDFC Bank Car Loan
      "There is so much hidden charges which they need to reduce "
      0.5 1.0/5 "Really Bad"
      My car loan was taken with HDFC BANK . I am not happy with services and there is no hidden charges with this bank . I applied for 4.3 lakh but i just got 396000 this is very disappointing i do not know where the rest of money they deduct , when i ask to customer support i did not got reply from them .
      Was this review helpful? 0
      , agra
      Reviewed on Mar 25, 2019
    • Bank Bazaar Car Loan
      "Good service"
      0.5 5.0/5 "Blown Away!"
      I've been using Bank Bazaar.com for the past many month. I do not have to struggle much to get this loan . The loan Application was easy and hassle free. The Customer support follow up was also good. Overall their platform is really useful for comparing .
      Was this review helpful? 0
      , bilaspur
      Reviewed on Mar 25, 2019
    • HDFC Bank Car Loan
      "Good service"
      0.5 5.0/5 "Blown Away!"
      I had taken HDFC BANK car loan . I applied for 7.2 lakh but i just got 6.6 lakh and i am fine with this loan amount . There were no hidden charges with this bank . They charge for GPS also . The rate of interest is 9.35% and it is very nominal . The tenure period is 7 year .
      Was this review helpful? 0
      , bilaspur
      Reviewed on Mar 25, 2019
    • review Car Loan
      "Good service"
      0.5 4.0/5 "Great!"
      My car loan was taken with TATA CAPITAL . The tenure period is 4 year . They charge very high rate of interest , they need to reduce so it will be more good experience . The loan amount is very much satisfactory . Customer support response is good . Overall i am happy .
      Was this review helpful? 0
      , mumbai
      Reviewed on Mar 25, 2019
    • Axis Bank Car Loan
      "Interest rate should be reduced"
      0.5 4.0/5 "Great!"
      The interest rate of Axis car loan is not economic, its bit higher than other banks. Because I took it for 12% but others are providing around 10.5%. However Axis bank is providing the flexible emi, balance transfer, part payment and foreclosure option.
      Was this review helpful? 0
      , kolkata
      Reviewed on Mar 25, 2019
    • Bank Bazaar Car Loan
      "Good Service"
      0.5 5.0/5 "Blown Away!"
      I Came to Know about Bank bazaar through Online .Once came to know about Bank bazaar tried to apply for HDFC Bank Car Loan .I have not faced any issues on taking this loan till now .The rate of interest was nominal and the processing fee was nominal as well .The Overall Service is Good .
      Was this review helpful? 0
      , ahmednagar
      Reviewed on Mar 25, 2019
    • HDFC Bank Car Loan
      "Good Service"
      0.5 5.0/5 "Blown Away!"
      I have applied for HDFC Bank Car Loan.The rate of interest was nominal and the processing fee was also nominal . I have not faced any issiues on submitting the documents .The loan amt was sufficient and i have received loan amt on time .I ahve choosed HDFC Bank Car Loan since i am a Regular customer of HDFC Bank .The Overall Service is Good.
      Was this review helpful? 0
      , ahmednagar
      Reviewed on Mar 25, 2019
    • Bank Bazaar Car Loan
      "Good Service"
      0.5 4.0/5 "Great!"
      I Came to know about Bank bazaar through Online .Once came to know about Bank bazaar i have checked credit score as well.Then tried to apply for ICICI Bank Car Loan.I have not faced any isues till now .The rate of interest was nominal and the processing fee was too high .while submititng documentsand there was a delay in loan processing as well .Other than that not yet faced any issues .The Overall Service is Goot and convenient.
      Was this review helpful? 0
      , chennai
      Reviewed on Mar 25, 2019
    • ICICI Bank Car Loan
      "Average service "
      0.5 3.0/5 "Satisfactory"
      I have applied for ICICI Bank Car Loan . Tt took 2 weeks time for processing. The rate of interest was nominal and the processing fee was too high .I have faced issues on submitting the documents and there was a delay on getting the loan amount .The loan amount was sufficient and not faced any issues as well .The Overall Service is Good .
      Was this review helpful? 0
      , chennai
      Reviewed on Mar 25, 2019
    • HDFC Bank Car Loan
      "Good Service"
      0.5 3.0/5 "Satisfactory"
      I have applied for HDFC Bank Car Loan .I have not yet faced any issues .The only issue was i have not received any calls frequently .Not yet received any proper information related to car loan .The rate of interest was nominal and the processing fee was also nominal .The loan amount got sanctioned on time and the loan amount was sufficient as well .The overall service is good.
      Was this review helpful? 0
      , greater noida
      Reviewed on Mar 25, 2019
    • Bank Bazaar Car Loan
      "Best Service"
      0.5 5.0/5 "Blown Away!"
      I came to know about Bank bazaar through Google and through link which gave the details about Bank bazaar as well.Then tried to apply HDFC Bank Car Loan .I have not faced any isues.The rate of interest and the processing fee was nominal .The loan amount was sufficient and the loan amount got on time as well.The Overall Service was good to me .
      Was this review helpful? 0
      , thiruvananthapuram
      Reviewed on Mar 25, 2019
    • HDFC Bank Car Loan
      "Best Service"
      0.5 5.0/5 "Blown Away!"
      I have choosed HDFC Bank Car Loan since got only HDFC Bank offer .The rate of interest and processing fee was nominal .I have not faced any issues till now .The loan amount got on time and the loan amount was sufficient as well .The agent clealry explained the process of the loan as well .The Overall Service was Good and satisfactory as well.
      Was this review helpful? 0
      , thiruvananthapuram
      Reviewed on Mar 25, 2019
    • Bank Bazaar Car Loan
      "Good Service"
      0.5 4.0/5 "Great!"
      I Came to Know about Bank bazaar website through Online Only.Once came to know about Bank bazaar i have started to check my credit score frequently.Then tried to apply for ICICI Bank Car Loan since got Pre-approved offer from ICICI Bank.The agent clearly gave the details the loan .I have not yet faced any issues till now .While submitting documents not yet faced any difficulties .The Loan amount was sufficient and i have got the loan amount on time .The Overall Service is Good to me .
      Was this review helpful? 0
      , ghaziabad
      Reviewed on Mar 25, 2019
    • ICICI Bank Car Loan
      "Good Service"
      0.5 4.0/5 "Great!"
      I have selected ICICI Bank Car Loan since got a pre-approved offer that is the reason i have selected .The rate of interest was nominal and the processing fee was also nominal as well .The agent clearly explained the process of the loan .There was no issues on submitting the documents .The loan got sanctioned on time and the loan amount was sufficient.The Overall Service is Good and Satisfactory a s well.
      Was this review helpful? 0
      , ghaziabad
      Reviewed on Mar 25, 2019
    • ICICI Bank Car Loan
      "GOOD"
      0.5 5.0/5 "Blown Away!"
      I have applied for the car loan with the ICICI BANK and i have been using it since from last more than 4 years. The rate of interest was nominal with this loan when compare to the other loans. It is a good loan to use also they provided the loan amount which was good.
      Was this review helpful? 1
      , ghaziabad
      Reviewed on Mar 24, 2019
    • SBI Car Loan
      "Very good customer service"
      0.5 5.0/5 "Blown Away!"
      I taken my New car in Maruti Swift Desire with the help of SBI . Maruti showroom has tie up with the SBI , so immediately approved my loan . It is very fast response from SBI executive . They given me the correct interest rate . Now another 12 months EMI is pending .
      Was this review helpful? 0
      , chennai
      Reviewed on Mar 24, 2019
    • HDFC Bank Car Loan
      "Excellent service"
      0.5 5.0/5 "Blown Away!"
      I have been holding my car loan with HDFC bank previously,they gave me loan amount based on the vehicle price,and the rate of interest they have charged me was nominal,and even they have charged me processing fee which was okay,now i have closed this loan.
      Was this review helpful? 1
      , hyderabad
      Reviewed on Mar 23, 2019
    • Kotak Car Loan
      "Good service"
      0.5 5.0/5 "Blown Away!"
      I took a Car loan from the KOTAK MAHINDRA BANK . Their rates are much cheaper that other companies. The application process was easy and hassle free. I never had any issues with their services. I use to pay my EMI on time . Customer support is good here .
      Was this review helpful? 1
      , thiruvananthapuram
      Reviewed on Mar 23, 2019
    • SBI Car Loan
      "Excellent service"
      0.5 5.0/5 "Blown Away!"
      I took car loan with State bank of India,The loan amount was sufficient,like based on my requirement they gave loan,and i have purchased Renault car , the rate of interest they have charged me was nominal,it is floating in nature,like based on the market value it use to change,they have not charged any processing fee, still this loan is running.
      Was this review helpful? 0
      , kolkata
      Reviewed on Mar 23, 2019
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