Prepayment of Auto Loans

Would like to know if any FC allows auto loans to be prepaid in full or in parts without penalty being levied. Have taken one from ICICI BK which quotes a prepayment break charge of 3% of outstanding. Additionally, no part prepayment is allowed. Do hunt around and let me know. Thanks

In ICICI Bank, * A full pre-payment of the loan is accepted. * Part pre-payment is not allowed. * They charge pre-payment fee of 5% on the outstanding principal amount. * Service Tax will be charged as applicable. Source : http://www.icicibank.com/Pfsuser/loans/carloans/alhowtorepay.htm


Don't walk as if you own the world. Walk as if you don't care who owns the world. That's Attitude!

This is a good information. even i have problem understanding the issues related to intrest rates and loan re payments.

With nationalised banks(PNB,SBI) the prepayment or part payment doesn't attract any charge. With private banks this charge is there.

Mr Sanjeev Wangoo is right about the nationalised banks, but there is just one clause with SBI which i am aware of.

In case the loan account is to be pre-closed, then not to attract any charge the completed tenure should be more than half the commited time.

For example if you have  7 year loan and you want to close it in less than 3.5 years then there is a charge of 2%, but if the closure is after 3.5 years then there is not charges.

Also there part payment is allowed

By the way, SBI is not a nationalised bank - it is a Public Sector Undertaking (PSU) Bank & so are its 7 associate banks (SB of Bikaner & Jaipur, SB of Hyderabad, SB of Indore, SB of Mysore, SB of Patilia, SB of Saurashtra & SB of Travancore).


Honesty is not a Spare Wheel that you pull out when in trouble. It's a Steering Wheel that keeps you on the right path throughout the life's journey.

Yes, what Saroj has said is true.  Nationalised & PSU Banks have pre-payment penality of 2% if the loan is pre-paid in less than half the tenure of loan, else there's no pre-payment penalty.

Pre-payment penalty is higher in private & co-operative banks and is generally levied even if the loan is pre-paid little earlier than the scheduled tenure.

Honesty is not a Spare Wheel that you pull out when in trouble. It's a Steering Wheel that keeps you on the right path throughout the life's journey.

I think, it is ridiculous for any Bank to not accept the prepayment of any loan. When a borrower is trying to clear all his dues why should not a bank accept it as a good gesture!

Banks are there for business and not for good gesture.

Loan repayment is there mode of income, and if you prepay, they are losing thier income for which they charge a penality.

Yes, I agree with Saroj.  I will explain it further....

Rate of interest is decided by any bank keeping in view the tenor of the loan / deployment of its funds & the likely return it would get therefrom.  Therefore, in order to ensure agaisnt mis-match of the same, banks discourage people from pre-paying the loan by way of stipulating / charging pre-payment penality.

Honesty is not a Spare Wheel that you pull out when in trouble. It's a Steering Wheel that keeps you on the right path throughout the life's journey.