Debt Repayment - Car Loan - Are you aware of the difference between Foreclosure and cancellation of a Loan - Brief Thread: Wanted to share a personal experience I had while repaying a Used Car loan. I had taken a Used car loan of around 15L @ interest 15%. 1/
The amount was disbursed by the Bank and I got possession of the Car. Within a week of disbursement, I had an unexpected inflow of amount equivalent to my car loan. Prudently I thought of clearing my used car loan. On contacting the Bank - 2/
I was advised that in the first year of the loan I would have to bear foreclosure charges of 5% of outstanding amount – which would have translated to 75K for a week-old loan. Spoke to my car dealer (who happened to be a personal friend) too on the same. 3/
The first Q that he asked me was has an EMI been paid out towards the loan – the answer was no. He then gave a workaround which my personal banker did not. If EMI has not been paid out towards a loan, then technically it’s not a foreclosure of a loan but a cancellation of loan 4/
I ended up paying a pre emi interest on the amount disbursed (from date of disbursement till the date of cancellation of loan) and a loan cancellation charge of 1K against the 75K which I was advised earlier. Saved me significant monies. 5/
