by Vinaya HS on January 4, 2011
in Finance
Update: I realized just yesterday that I’ve made a worse mistake: a BIG miscalculation in my income tax liabilities. Bummer! I’ll write about this in detail in the next post.
Having spent quite some time in thinking about my personal finance resolutions for 2011, I also spent some time reflecting upon what was perhaps my biggest financial mistake in 2010. You already know that I saved quite aggressively towards closing the loan on my Swift. But once done, I became quite lax in taking the next steps. I closed the loan on priority but completely procrastinated in getting the hypothecation removed from the Vehicle Registration and Insurance records.
I couldn’t have made as bad a mistake as this one. My Swift isn’t really mine until the hypothecation is canceled.
Too many things happened that led to such a situation.
To begin with, Axis Bank, from whom I’d availed the car loan, messed up in mailing the No Objection Certificates. They had my correct postal address on record but they managed to send the post to a wrong address. I waited for close to 2 months (since Axis Bank had quoted 45 days for the post to be dispatched) before I made a personal visit to their Regional Processing Center (whose location had changed since the time I pre-closed the loan). I discovered their mess-up only then. Thankfully, they had my certificates lying around in a cupboard. It’s vital that you keep the loan pre-closure receipt safe until you have the No Objection Certificates in your hand since that’s the only proof of payment you have.
The next couple of months were hectic since I was settling down at my new job and was also traveling around on personal and official trips. Come mid-December, it was already 4 months since I’d pre-closed the loan but the hypothecation was yet to be canceled. I should have prioritized this task and made time in-between, but I didn’t. Thankfully, the No Objection Certificates were valid for 6-months from issue — they’re generally issued with a 90-day validity.
It was only last week that I finally took my own advice. In a couple of days, my Swift will finally be mine. :-)
Lesson learned.
by Vinaya HS on June 25, 2010
in Finance
I have a question:
In general, is it possible to make part prepayments (towards the outstanding principal) on your car loan? My specific situation: a car loan from Axis Bank that I intend to close by the end of this year.
If the answer to my question is a YES, how do I go about doing it?
by Vinaya HS on May 4, 2010
in Finance
The only debt I have is my car loan and one of my short-term financial goals this year is to get rid of this debt (I’m debt averse; D’s obsessively debt averse). That said, I do have a long-term financial goal where I want to fully pay for my next car in cash.
How do I even come close to doing that?
Here’s an effective strategy that I came across:
Once the loan on your present car ends, imagine that you’re still continuing to pay the EMIs (or a higher/lower amount based on your circumstances) albeit on a hypothetical loan whose tenure is equal to the expected life of your present car since purchase minus the tenure of the loan that you just cleared.
Depending on this tenure, you’ll need to save/invest the EMIs on the hypothetical loan in the appropriate financial instrument.
I went further and cooked up a “My Next Car Savings Calculator”. This calculator gives you a projected amount that you’d have at the end of the hypothetical loan.
What do you think?
Tip Tuesdays is my initiative to share practical personal finance tips — every Tuesday. I’d be delighted if you could share a tip or two from your own experiences. Drop a comment to submit your tip. And, as always, do spread the word if you find this useful.
by Vinaya HS on January 23, 2009
in Finance
Assume that you’re looking out for a car loan and some bank offers you the following options:
- Rs 200,000 for 36 months at 9% fixed plus a processing fee of Rs 150, or
- Rs 200,000 for 36 months at 12.75% reducing balance.
Which of these two loan offers would you choose?
If you chose either of the options, without asking further questions, you’re wrong. The first one looks cheaper prima facie and is psychologically very appealing. The second one doesn’t say whether the interest rate is fixed or floating through the tenure. Both of them don’t say whether the EMI’s are in advance or arrears. This is where your level of financial awareness comes into picture. A loan that looks and sounds cheap most certainly isn’t so. I am aware of a recent incident where an expensive car loan masquerading as a cheap loan was pushed to a relative of a friend.
You should ask questions. Lots of them. There are no dumb questions in personal finance. It’s your money after all. And, your very first question to the bank should be to ask them for a complete loan amortization schedule for any option they quote so that you can compare firsthand the total interest component that you would be paying.
Awareness Fridays is my initiative to spread awareness on topics relevant to personal finance — every Friday. I urge you to take some time off and absorb this information — it’s pretty useful. And, as always, do spread the word if you find this useful.
by Vinaya HS on July 3, 2008
in Finance
- Download my Car Loan EMI Calculator Excel workbook.
- This workbook has six sheets, one each for a loan duration ranging from one year to six years.
- Select the sheet corresponding to the loan duration you’re thinking of. For example: select the sheet labeled “4 Years” if you’re looking for a car loan that you want to repay in 4 years’ time.
- You will now find three cells highlighted in yellow — one for the loan amount, one for the interest rate, and one for the type of EMI payment. You need to provide your inputs in these three cells. Note that changing the data in one sheet will not affect the other sheets.
- The workbook automatically computes your Car Loan Amortization Schedule.
- You can now Save/Print this sheet for your reference.
Let me know if you’re facing any difficulty. Drop a comment if you find this calculator useful.
by Vinaya HS on November 22, 2007
in Finance
In October, I paid the final EMI (Equated Monthly Installment) on my car loan from ICICI Bank. Back then, I wasn’t sure about the steps to be followed next. Now that I have figured out what exactly needs to be done once you’ve paid off your car loan, I thought I’d document it here.
Step 1
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Ensure that you have received all the canceled post-dated checks that you had issued to the bank/finance company when you took the loan. I received these on time — through courier — from ICICI Bank.
Step 2
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Ensure that you have received the No Objection Certificates (NOCs), one addressed to the Regional Transport Office (RTO) where your vehicle has been registered and one addressed to your insurance company. I didn’t receive these certificates from ICICI Bank until I reminded them to do so (over the phone). The NOCs are normally valid for a period of 90 days from the date of issue.
Step 3
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Take a photocopy of all the above documents — just to be safe — and keep them locked at home. I forgot, but luckily things progressed without a hitch.
Step 4
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Ensure that you have the original and a photocopy of the following vehicle documents ready: Certificate of Registration (popularly called “The RC Book”), insurance certificate, lifetime tax paid receipt, and emission certificate (last two are optional, but you can never guess what’s required at the RTO).
Step 5
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You need to first get the hypothecation/lien registered in the RC Book canceled at the Regional Transport Office (RTO) where your vehicle has been registered. I’d advise you to get this done through a reputed driving school since they do all the cumbersome legwork and form filling for a fee. The driving school will need the NOC (addressed to the RTO), original RC book, and a copy of the insurance certificate, lifetime tax paid receipt, and emission certificate.
Call it outsourcing, if you must, but you’ll get the updated RC book — with the hypothecation canceled — within a day or two.
Step 6
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Now that you have the hypothecation canceled in the RC book, it’s time to hit the insurance office. Do remember to take the NOC (addressed to the insurance company), a photocopy of the updated RC book, a photocopy of the insurance certificate, and the originals (in case they need to verify). The insurance company will update their records and issue a letter stating that the hypothecation has been canceled. Staple this letter to the original insurance certificate.
That’s it! It shouldn’t take you more than four to five days to complete these procedures. Good luck and feel free to pass this information around.
I’d love to hear your feedback too.
Related post(s):
by Vinaya HS on August 27, 2007
in Finance
In a recent notification, the Reserve Bank of India (RBI) has noted that
It is understood that some banks are furnishing a copy of the loan agreement only on request made by the borrowers. In this connection, we advise that not furnishing a copy of the loan agreement or enclosures quoted in the loan agreement is an unfair practice and this could lead to disputes between the bank and the borrower with regard to the terms and conditions on which the loan is granted.
The RBI has therefore directed all Scheduled Commercial Banks and Financial Institutions to
…invariably furnish a copy of the loan agreement along with a copy each of all enclosures quoted in the loan agreement to all the borrowers at the time of sanction / disbursement of loans.
While the RBI does a decent job of posting such notifications on its website, it’s certainly not the most effective way to reach the intended recipients – the people who take the loans. After all, how many among you take time off every week to read up on the RBI’s website?
Maybe it’s time the RBI started a consumer-education initiative; a weekly front-page column in a few leading newspapers should be a good start. What do you think?
Previous issues of Know Your Rights:
by Vinaya HS on April 6, 2007
in Finance
Public Service Announcement
From a recent RBI circular:
Guidelines on Fair Practices Code for Lenders
Earlier, Banks/FIs were advised that loan application forms in respect of priority sector advances up to Rs. 2.00 lakhs should be comprehensive and should include information about the fees/charges, if any, payable for processing, the amount of such fees refundable in the case of non-acceptance of application, pre-payment options and any other matter which affects the interest of the borrower, so that a meaningful comparison with that of other banks can be made and informed decision can be taken by the borrower.
The RBI now says:
With a view to achieving greater transparency and in the light of experience gained, it has been decided that the above instructions will be applicable to all loan applications in respect of all categories of loans irrespective of the amount of loan sought by the borrower.
Banks/FIs were so far advised that in the case of small borrowers seeking loans up to Rs. 2.00 lakhs the lenders should convey in writing, within stipulated time, the main reason/reasons which, in the opinion of the Bank/FI have led to rejection of the loan applications.
The RBI has amended that to:
On a review, it has been decided that in case of all categories of loans irrespective of any threshold limits, including credit card applications, Banks/FIs should convey in writing the main reason(s) which, in the opinion of the Bank/FI have led to rejection of the loan applications.
Necessary modifications in the Fair Practices Code based on the above instructions, with the approval of the Board, should be carried out by April 30, 2007. The modified Fair Practices Code should be placed on the Bank’s/FI’s website and also given wide publicity.
