Bnzy, hope you keep the following points in mind: - You get rebate on IT on home loan - you can show the interest amount as loss on the house. This is apart from using upto 1Lacs of the Principal amount repaid for section 80C. So it is a good loan to keep. - There is no such provision as far as car loans are concerned - interest paid there is not a loss that you can offset. But since it does not make sense to repay because of the charges, lets not talk about it. Suggestion: I think putting the money you intend to repay in an FMP / money market fund for the duration of your car loan should make sense. Tax liability on these would be low (inflation adjustment / LT capital gains). And you can continue to take full (effectively 30%) rebate on account of interest outgo on home loan. Risk is also very low compared to equity funds. The assumption is that your return would be higher than your home loan rate. This is especially true in case you have taken one of the teaser rates from SBI. Never go by what a sales chap says, whether a car dealer or a bank - they are all out to make a quick buck at your expense. Trust only the words of the agreement.