Know Overhead Charges While Applying For A Car Loan

charges for car loan

Car loans are hugely popular for all kinds of people. For some, car loan is the chance to realize their life long dream of owning their very own vehicle with their own income. While for some, car loans are an opportunity to upgrade to a new car with more features and options. However, did you know that your Car Loan agreement might include some terms and conditions related to overhead charges that may not have been communicated to you at the time of loan application? Here are some details on overhead charges that will help you to choose the right car loan.

Foreclosure Charge – Some people take a car with an objective to repay as fast as possible with the help of an annual bonus. However, you must know that not all banks allow foreclosure of loans and some that do place a foreclosure penalty in the form of an additional charge. State Bank of India, State Bank of Hyderabad, Punjab National Bank, Indian Overseas Bank, Andhra Bank and Kotak banks are some examples of banks that offer foreclosure without any penalty. For rest of banks such as ICICI, HDFC, Tata Capital, etc. the foreclosure charges are usually set at 1 to 6 percent. It is best to confirm with your bank about their foreclosure terms.

Advance Part Payment – A few banks allow advance part payment facility for borrowers who would like to prepay some loan amount in the hope of a lower interest rate and a lower tenure. However, not all banks allow an advance part payment or prepayment facility and you must check with your financial institution regarding their advance part payment policy.

Fees to process your application – Also known as processing fees, banks apply them to all loan applications, including car loans to cover the internal costs involved in checking your credit history, covering the administration expenditure, etc. People with a higher credit score usually get pre-approved car loans offers with zero processing fees as a bonus. Banks charge usually between Rs. 2000 to Rs. 11,500 as processing fees or in the form of percentage set anywhere between 1 percent to 3 percent. Your bank will usually inform you of the processing fees involved and deduct that amount from your car loan disbursal amount.

Document Fees –Document fees are charged by banks to process your loan application and cover the legal costs such as stamp duty, registration cost, etc. These charges are governed by every bank’s internal policy and differ. Document fees are also deducted from your final loan disbursal amount, so it is best to check with the bank how much amount they will be deducting for document fees`.

Penalty on unpaid EMIs –Banks and financial institutions charge heavily on unpaid EMIs that have been missed due to non-payment. Banks usually charge late fees ranging from Rs. 500 to Rs. 1000 plus additional interest calculated according to their late payment or default policy. You can find this information on the bank website easily under the charges information.

Hidden Fees – These are miscellaneous fees and charges added by a bank for several purposes. You must check your car loan agreement before signing to make yourself aware of all the fees and charges that will be categorically listed there.

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