With the growth of economy and evolution of banking system, purchasing power of individuals seems to have increased significantly. Apart from preferring an improved lifestyle, people are now found pursuing comfort and leisure. Even for a small journey across the city, they now prefer private vehicles over public transport. This approach has substantially increased the demand of cars in the country.
The versatile credit system in the Indian economy allows many banking and non-banking bodies to provide easy loans to borrowers. Taking advantage of this opportunity, many car aspirants have now fulfilled the dream of owning a car. With easy installments and quick documentation processing, borrowing a car loan has become simple.
Yet many people don't like their vehicles lying under the burden of loan installments for a long time. For them, financial bodies like Magma are providing special loan-foreclosure or prepayment facility on car loans. The following sections will talk about foreclosure, its benefits and its charges.
What is Foreclosure or Prepayment?
Foreclosure means paying off the entire loan before time, without following the installment schedule. Whenever a loan is foreclosed, the borrower does not have to pay the extra interest, which would otherwise be retracted through the installments.
Benefits of this facility
Car loans are usually secured by keeping the vehicle as collateral. On pre-paying the loan, you get full ownership of the car, and can readily sell it or transfer it to someone, without having to consult the bank. Moreover, you need not have to worry about fluctuating car loan interest rates that are generally linked with floating-rate loans.
Procedure and Charges
For initiating the pre-payment process, the borrower needs to approach the bank personally. Many banks and NBFCs like Magma do not allow foreclosure for 6 months from the date of availing a car loan. After the 6 months span, 5% of the total outstanding amount is to be paid as pre-payment penalty. Nevertheless, this penalty is comparatively lower than the impending interest, which you would otherwise pay on installments.
So, avoid keeping your ride as collateral, go ahead and release it with loan pre-payment.
Yet many people don't like their vehicles lying under the burden of loan installments for a long time. For them, financial bodies like Magma are providing special loan-foreclosure or prepayment facility on car loans. The following sections will talk about foreclosure, its benefits and its charges.
What is Foreclosure or Prepayment?
Foreclosure means paying off the entire loan before time, without following the installment schedule. Whenever a loan is foreclosed, the borrower does not have to pay the extra interest, which would otherwise be retracted through the installments.
Benefits of this facility
Car loans are usually secured by keeping the vehicle as collateral. On pre-paying the loan, you get full ownership of the car, and can readily sell it or transfer it to someone, without having to consult the bank. Moreover, you need not have to worry about fluctuating car loan interest rates that are generally linked with floating-rate loans.
Procedure and Charges
For initiating the pre-payment process, the borrower needs to approach the bank personally. Many banks and NBFCs like Magma do not allow foreclosure for 6 months from the date of availing a car loan. After the 6 months span, 5% of the total outstanding amount is to be paid as pre-payment penalty. Nevertheless, this penalty is comparatively lower than the impending interest, which you would otherwise pay on installments.
So, avoid keeping your ride as collateral, go ahead and release it with loan pre-payment.
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