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Early Car Loan Settlement - 20% Penalty


Shingkyo
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Hi,

 

Is it that nowadays the banks will charge 20% on unearned interest for early car loan repayment irregardless of your car <55K (Governed under Hire Purchase Law) or >55k (Governed under Common Law)?

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Yes, they said they need to impose 20% + some admin charge... But my car is under 55k which is to be governed by HP Law where the bank should not be charging this 20%...

 

Advise?

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Yes, they said they need to impose 20% + some admin charge... But my car is under 55k which is to be governed by HP Law where the bank should not be charging this 20%...

 

Advise?

 

not necessary.... because due to change in law for rule 78...... the 20% may still be charged under HP law.... but it must be stated in your contract... look thru your contract details and see if it is stated....

 

i used to work in a finance company.... hopefully my info is not our dated

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quite standard, due to the curiousity, after reading this thread.

 

i called up my bank and find that the penalty is also around 20% of the 'rebate'.

but what is the 'rebate', need the loan department to call me up and explain.

Edited by Kurty
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quite standard, due to the curiousity, after reading this thread.

 

i called up my bank and find that the penalty is also around 20% of the 'rebate'.

but what is the 'rebate', need the loan department to call me up and explain.

 

rebate is based on interest not earned on the loan...

 

an example in layman terms...

 

7yr loan will have 7yr interest but if you full settle on 3rd yr... you have 4 yrs of interest rebate as you did not use the loan for the remaining 4 yrs... but because of rule 78.. the calculation is not as simple as interest divide by 7yrs X 4years

 

because rule 78 in layman terms means you pay more interest upfront....

 

for eg:

1st yr $1,000 installment = 900 to interest + 100 to principle

2nd yr = 800 to interest + 200 to principle

etc

 

so if you want to full settle after 3yrs.... your rebate may not be alot... as you have paid most of the interest during the 1st 3yrs installments.... this is why rule 78 is a killer

 

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so bro, based on your experience, what do you reckon?

 

early settlement or just leave it alone..

 

to me.. as long as you have taken a loan.. it is best to carry on till end of tenure....

 

i know you intending to change car.... try not to....unless absolutely necessary

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so bro, based on your experience, what do you reckon?

 

early settlement or just leave it alone..

Leave it alone and make them do transactionary work.

My loan from one American Bank put ALL the Interest in 1st Year OK... KNN...

After 1st year I still owe them my full loan amount. I was so C2Pid not to read the fine lines...

Kena conned...

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not necessary.... because due to change in law for rule 78...... the 20% may still be charged under HP law.... but it must be stated in your contract... look thru your contract details and see if it is stated....

 

i used to work in a finance company.... hopefully my info is not our dated

 

yes, this is right.

the new rule came into being about 5 yrs ago.

all hire purchase contracts should contain the revised clause already.

otherwise, it must simply be the company sleeping, which is quite unlikely given that this is a P&L issue to them.

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to me.. as long as you have taken a loan.. it is best to carry on till end of tenure....

 

i know you intending to change car.... try not to....unless absolutely necessary

 

wah, like tat also know... power [laugh]

 

apart from intending to change car, my interest is high. 3%, thus was thinking of clearing the debt, then my cost of ownership will be further decrease ^_^

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to me.. as long as you have taken a loan.. it is best to carry on till end of tenure....

 

i know you intending to change car.... try not to....unless absolutely necessary

 

wah, like tat also know... power [laugh]

 

saw your accident thread before

 

apart from intending to change car, my interest is high. 3%, thus was thinking of clearing the debt, then my cost of ownership will be further decrease ^_^

 

how long loan you take and left how many years?

 

anyway anything more than 3yrs... you carry on lar.... overall you will lose more when refinancing..

 

also fyi if you duno... interest rate quoted is nominal rate... the effective rate (actualy rate you are paying) is about double....

Edited by Galantspeedz
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