[Aviator_guy]

Originally Posted by padmrajravi

Your post has distracted me from my next car plans. I had a chat with my SBI branch manager and she maintains there has not been any change

Is there any document or source that you can point me to, which I can show her and clarify ? My primary account is with HDFC and I go through the hassle of dealing with SBI only because of this foreclosure mechanism. If what you are saying is true, I am better off using my pre-approved HDFC loan.

I can totally relate to this message. I have long relationship with HDFC bank and loan is pre-approved. However I am in no mood to deal with their weird TnC regarding part payments / foreclosure hence went to SBI for pre-approval though i don't have any relationship there. Got my loan approved in a day and the manager mentioned that there is no penalty after 2 years. In fact the charges within 2 years are very nominal vs HDFC bank. I got approval for fixed rate plan. I checked their website and found that they charge interest on daily reducing balance and there is no advance EMI. The only thing which is not clear to me is difference between fixed rate vs floating rate - whether the part payment and foreclosure charges/TnC would differ? Which one to go for? I'm not worried about rate fluctuations since I don't plan to keep loan for more than 2-3 years.

[vivekgk]

Please go through the Arrangement letter that was handed to you when you took the loan. It is a document that has all the details of the loan, including the terms and conditions and the interest rates. As already mentioned in this thread, the initial payments towards your loan will mostly be towards interest. This is how EMI works. As you pay more EMIs, more of your EMIs will go to the principal.

In case you have availed restructuring at any time, you will often see that 100% of the EMI goes towards servicing interest during the loan moratorium period.

If you remit a bulk amount in your loan account, this is what will happen. The bulk amount you remit will be reduced from your principal. However, your EMI will not change.

Say your loan balance is 10 lacs, and you remit 2 lacs to your loan account. Assume that your regular EMI is 18K (E). Since you have remitted 2 lacs excess, the interest charged for the following period (I) will be less. But, the EMI will remain the same, and (E-I) will be reduced from your principal outstanding. Next month, the interest will be charged for an even lesser amount, as more of your previous EMI went towards the principal. So, an even lesser amount will be charged as interest, and even more amount will be paid to principal. Eventually, your loan will get paid off a lot sooner. Another advantage is that you have a buffer amount, so that you can afford to miss some payments in case of some emergency. (more than 11 months in this case).

Beware that depending on your financier, they may refuse to accept the advance payment, or impose a penalty on you at the time of closure. Again, refer to your loan arrangement letter's terms and conditions.

Banks do not like pre payments, as it reduces their overall interest income and advance figure. Hence the pre payment clauses and penalties to dissuade customers from paying more than the EMI.

[dr_TJ]

After I am done with my ICICI Bank Car Loan, I will have to be very very careful when I get a car loan for my next car.
Which bank has the better policies? Yes, loan pre-closure is something the banks don't like, also Part-payment but these two things are a must-have feature for me next.

What would you guys suggest?

[Aviator_guy]

Originally Posted by dr_TJ

After I am done with my ICICI Bank Car Loan, I will have to be very very careful when I get a car loan for my next car.
Which bank has the better policies? Yes, loan pre-closure is something the banks don't like, also Part-payment but these two things are a must-have feature for me next.

What would you guys suggest?

You should definitely consider SBI for transparency and no nonsense TnCs compared to the pvt players. I do not have experience with other nationalised banks so can't comment. Car loan processing is not that complicated and some dealers even have tie ups with SBI. Things have come a long way for SBI the way they have been handling my paper work even though I don't not have any relationship with them.

[kozhissery]

If I'm not wrong, SBI had withdrawn the feature of fore-closing the auto loan sometime in 2019 beginning. Till that period auto loans could be pre-closed without penalty. As RBI has mandated against pre-closure conditions for Home loans, you can pre-close home loans without any penalty.

Bankers here can correct me if I'm wrong.

[Aviator_guy]

Originally Posted by kozhissery

If I'm not wrong, SBI had withdrawn the feature of fore-closing the auto loan sometime in 2019 beginning. Till that period auto loans could be pre-closed without penalty. As RBI has mandated against pre-closure conditions for Home loans, you can pre-close home loans without any penalty.

Bankers here can correct me if I'm wrong.

I think there is some misunderstanding in this regard. Earlier Pre-closure was allowed without any condition and now there are certain terms you need to keep in mind. SBI has taken a cue from pvt players and now that people are open to give them business, they have introduced certain penalties for pre-closure and part payment within first 2 years of loan. Still the terms are more flexible, transparent and most importantly penalty is less than pvt banks

[Samrat]

Originally Posted by padmrajravi

Your post has distracted me from my next car plans. I had a chat with my SBI branch manager and she maintains there has not been any change in terms and conditions for auto loans. As per her, everything remains the same as my earlier loan which I just closed with them. The interest amount will be calculated based on the daily remaining balance and there is no limit to prepaying. Their only condition is that loan should not be completely closed before two years. The interest rate will be floating and so EMI will change with policy changes that affect MCLR, repo rate, etc. This was the case with my earlier loan too. I had to deal with a small increase in EMI when there was some policy change.

Is there any document or source that you can point me to, which I can show her and clarify ? My primary account is with HDFC and I go through the hassle of dealing with SBI only because of this foreclosure mechanism. If what you are saying is true, I am better off using my pre-approved HDFC loan.

I do not have any documents. This was what was communicated to my father from 2 different sources. One was the SBI branch the dealer had tied up with and the other was his home branch. If you are getting foreclosure options, then definitely do go for that. Clarify that specifically because this was what I had asked my father to clarify as well.