Loan Foreclosure

Dear friends,

I am planning to foreclose my loan which i took last June.

I have an o/s car loan with HDFC Bank for Rs. 4.50 lacs. I am planning to foreclose the same.
The Bank is charging me 5% of o/s principal as pre-closure charges.

Is there any way that this can be waived ? or reduced ?

Sometime back, one of the local branch manager informed me that the charges can be waived if i open a savings a/c with them with 1 lac average monthly balance. Now this guy has moved to some other Bank and the none in the branch/loan centre is willing to waive/reduce the charges.

I dont stand to benefit if i preclose with 5% penalty. If that being the case, i would like to invest the money wisely & let the loan remain.

Your advise please !

Checkout if there is an option for partial prepayment where you can pay a major part of your o/s principal but keep something like 20K still outstanding. Then you can pay EMI for this 20K alone till the lone tenure.

5% of 4.5L = 22.5K + o/s principal 4.5L ==> You have to pay the bank ~4.73L today to close the loan.
a) 4.73 term deposited for 6.5% interest p.a => You get some about after the term period.
b) Checkout for yourself what amount you will pay in terms of EMI if you continue the loan ==> o/s months * EMI

If a > b, then in all probabilities, You should keep the loan running.
If you are ready to take some risk then there are better investment choices than term deposits.

I am seriously thinking of a partial pre-payment of my car (as well as home) loan. Seems I have to sit with a spreadsheet (really have to take time out for this !), but should be a wise decision - as the benefits out of loans (the home one) are likely to dwindle in coming years. So it is better to find a good way out, as pre payment now than later will be better beneficial - for any loan.

I don't think HDFC allows partial pre payment. I took the car loan from HDFC. They way I am planning is : I intend to close the loan completely sometime next year. So I have divided the money I need to pay next year into Bank FD's and stocks. Hoping to get 10-15 % average combined return on that. Then will close the loan. Lets see how this works out.

Thanks friends for the all the advise.
HDFC doesnt allow partial payment so the idea of Grandeur's doesnt work !

I have decided to close my HDFC home loan which doesnt have any foreclosure charges if paid from own funds.
Did some maths and found this better from the savings perspective.

Can you please elaborate on that ? How are you avoiding foreclosure charges?

For home loans, HDFC doesn't charge for pre closure if the loan is closed after the first 3 years. It shouldn't be a takeover from other bank but from ones own savings.