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Prepay in Car Loan
Posted on Tuesday, April 13th, 2021 | By IndusInd Bank
When the borrower executes the car loan’s early payment, either the partial or entire amount of loan, then it is known as prepay in car loan. However, there are several other benefits of prepayment in a car loan that can be availed by the borrower.
In this article, we will discuss the benefits followed by the prepayment charge calculation. But, before that, let us have a look at the car loan fore-closure procedure.
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What are the Steps of Car Loan Foreclosure Procedure?
- When purchasing a car, the loan sanctioning bank’s name will be mentioned on the RC (Registration Certificate) of the car.
- The borrower has to collect all the post-dated cheques issued to the bank at the time of foreclosing the car loan.
- The borrower has to ask for No Objection Certificate (NOC) from the bank stating that no dues are pending. The borrower should submit the NOC insurance provider and RTP (Regional Transport Office).
- At the foreclosure of a loan, the borrower must have all the essential documents like tax papers, Insurance documents, Emission Certificate, and Original copy of RC.
- Ask the bank to provide you Form 35, stating that the mortgage terms have been terminated between the borrower and the bank.
- Submit the photocopies of the updated records like RC, Insurance records, and NOC to the insurance provider. So, the insurance provider can serve a mortgage termination letter to the borrower.
What are the Benefits of Prepayment in Car Loan?
Savinginterest costs
The borrower has to pay a monthly EMI payment.However, prepayment in car loan can reduce the cost of borrowings, i.e.Interest amount of loan. But, it will depend on the terms of the loanagreement.
Unlockfinancial resources for other expenditures
This is one of the essential benefits of Prepayment in a Car loan that can be unlocking the funds for other expenses and investments. Even the borrower can use the funds to repay other financial debts like home loan, educational loan, etc. Looking to apply for a car Loan? Click here to get started!
How to do Prepayment Charge Calculation?
Prepayment Charges is a mandated charge imposed by the bank on the early repayment of the car loan. Prepayment Charge Calculation has to be done based on the car loan’s issuing date, tenure of the loan, interest rate, original amount of loan, etc. Some of the calculations require number of months left for the payment of loan EMI’s. However, all the inputs will be varied as per the terms of the loan agreement.
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Disclaimer: The information provided in this article is generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. Hence, you are advised to consult your financial advisor before making any financial decision. IndusInd Bank Limited (IBL) does not influence the views of the author in any way. IBL and the author shall not be responsible for any direct/indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information.
