BEWARE - Penalty Charges for Car Loans!!!

[Lorrliew]

It has come to my notice that the latest car loans in the market has some forms of penalty cluases for early redemption/settlement. This is in addition to the Rule of 78 in calculating interest rebate when you do an early redemption/settlement, which is effectively already by itself a penalty.

 

It was a big suprise for me as my last loan 2 years ago does not has such clauses. There was a big discussion not too long ago about Rule 78 which is deemed an outdated rule and unfair to consumers and now in additional to Rule 78 there is these penalty clauses. The banks/finance/leasing companies are really capitalising on consumers' habit of changing cars 'frequently'.

 

While most only concern about the interest rate, please do not believe that the lowest interest rate gives you the best deal. The penalty clauses can make a huge difference, it can be in the quantum of hundreds to thousands of dollars difference depending on the clauses, loan amount and when you do an early settlement.

Edited April 25, 2007 by Lorrliew

[Yuendi]

Yes, rule of 78 is already bad enough and now got penalty? That's why I always advise those who owns both car and flat/condo/house that they should pay 100% cash for car and take bigger bank loan for their accomodation. I will do the same the next time I change my car.

Edited April 25, 2007 by Yuendi

[Acemundo]

http://www.mycarforum.com/forum/gforum.cgi...1212388#1212388

 

check out my earlier posts....i hv also been warning car buyers about this additional penalty that was not so obvious

[Reng]

well,everybody also like to pay cash,problem, is how many people can affort to do so.

[Whiteblackred]

thanks for the heads up!

[Ahyoo2002]

More and more banks will add the 20% penalty to the loan taken for early redeemption.

 

And for those cash back deal, more penalty will be imposed if you decide to change your ride or redeem your loan

[Acemundo]

yeah lo, which gives me more incentive to keep the current car....or make sure i buy the next car with minimal loan.

[Galantspeedz]

den dun buy car or buy smaller car lor

[Clazio71]

These clauses are always written in the smallest of fonts and in very chim or hard to understand legal terms that put borrowers in a very disadvantaged position. Must be very careful with sufficient research before taking any loans on vehicles or housings because these are all long term commitments and involve hundreds of thousands of dollars easily, unlike shopping for groceries or eating out at restaurants which are one-time transactions without any further worries after that.

[Sgnick]

Minimum or no loan, the SE won't give u discounts, becos they make less comm from the loan. So u pay less interest but more for the car.

[Ahyoo2002]

true, or try to make sure that the car you buy is what you want and do not change car too frequently

[Acemundo]

yes and no lo.....

 

i hv seen many different cases....some ask u commit loan of minimum quantum (no restrictin on tenure) to get freebies

 

some restrict on minimum loan but not the whether it is fixed rate or variable rate package. there is 1 variable rate package that has no penalties on repayment.

 

lastly, i may not only consider first hand car......so there's a lot of variables to consider.

[Acemundo]

yep.....i have been staving off pressure to change car from friends and wifey.....

 

everyone change car when theirs is 3 years old.........mine is now 3.5 years old and i still reckon i can more than 1 year.

Edited April 25, 2007 by Acemundo

[Ahyoo2002]

mine is 5 yr + liao

[Acemundo]

wow, that's great, which car u driving?

[Ahyoo2002]

Lancer.

 

I want to change but now car price too high

[Tiek]

That really sucks man. My SE only told me abt rule 78 when I asked her abt early settlement. How can I know if my loan has this 20% rule? I took 7yr 30k loan from Maybank for a Subaru.

[Acemundo]

i hv did some calculation....only need to re-confirm with 2nd hand car dealers if < 5 years old got at least 3k body value and if > 5 years got any minimal body value.....

 

after that will decide on course of action.

Edited April 25, 2007 by Acemundo