I want to prepay my car loan. Is this possible? What is the procedure for the same?
Ramesh Narayan, Lucknow
Repaying a car loan before its tenure is a good move. Car loans are expensive and you land up paying a lot more by way of interest on an asset depleting asset – the value of the car goes down each passing day, but you repay the loan on the same price at which you bought it. You can prepay your car loan, but before doing so you will have to check with your bank if there are any prepayment charges involved.
Once you have paid off the entire principal amount, you will have to collect the final settlement letter from the bank, which will state that you have foreclosed the loan. Also, get a form signed by the bank, which states that the endorsement is removed from the registration document of your vehicle. Similarly, you will need a clearance certificate from the bank to get its name removed from the insurance policy of your car.
