Penalty for early loan settlement

[HumbleCar]

Just went through the Hire Purchase Agreement document and realised that there will be a penalty for early loan settlement.  The penalty amount is 20% of the Rebate amount based on Rule 78.  The penalty period covers the whole duration of the loan period.  So, please do your sums first if you plan to clear your car loan earlier to see if it is worth doing so.  The 20% can amount to quite a large sum, depending on original loan amount and loan period.

Feel cheated because my previous car also from TCM in-house finance don't have such penalty. 
 :-(

[beluga]

Just went through the Hire Purchase Agreement document and realised that there will be a penalty for early loan settlement.  The penalty amount is 20% of the Rebate amount based on Rule 78.  The penalty period covers the whole duration of the loan period.  So, please do your sums first if you plan to clear your car loan earlier to see if it is worth doing so.  The 20% can amount to quite a large sum, depending on original loan amount and loan period.

Feel cheated because my previous car also from TCM in-house finance don't have such penalty. 
 :-(

R U sure???? All car loan is standard Rule 78..... Even more so for an AD and in-house finance.

[HumbleCar]

R U sure???? All car loan is standard Rule 78..... Even more so for an AD and in-house finance.

You are correct that the standard Rule 78 is used to compute the interest rebate.  But hor, there is an asterick which indicates the 20% penalty for early loan settlement.  There wasn't any such penalty for my previous car (also a Nissan) and also in-house finance.  But now, the finance is from different bank.  Don't know when was the penalty thingy first imposed. It is written in black and white in the agreement.  How to argue with them.  Sign on dotted line time also never read.  There are just too many documents that we signed on.  Nobody highlighted the penalty thingy.  So, sign happily lor.  Now feel cheated!

Yours no penalty is it?  When did you book your car?  If TCM in-house finance offers different terms to different customers, I am going to question them.  Can help to check your agreement and let me know if there is any penalty mentioned in your case?  Thanks.

[beluga]

Mine is the same as your current contract which is 20% rebate only if early settlement. I  book my car in mid-march

[HumbleCar]

Mine is the same as your current contract which is 20% rebate only if early settlement. I  book my car in mid-march

Hi Bro,  That is exactly my point lor.  Penalty for early settlement.  Not informed of it earlier.  Otherwise, will not take the in-house loan.  Cheaper to pay upfront which means an additional $1,500.  The SE advised earlier that it is cheapter to take loan and get the $1,500 discount first and then do early settlement after a year.  (Understand that the terms that were in place for quite a long while were something like:  $1,500 in-house loan discount for a minimum $30K loan with a one year lock-in period.)  The effective interest rate indicated in the agreement is about 4.9 percent.  In that case, why pay 4.9% interest where your bank deposite earns you only about 1+ percent interest or lower?  (-- leaving aside about other investment with potential higher returns that come with higher risk where you may even loss all your invested capital)

[josho]

Just move on ba.. no choice. 

Anyway, keep the money if you see 'no flower' to pay the interest.

Mine is Maybank and was told there's penalty involve if I want to settle the payment earlier.

[HumbleCar]

Just move on ba.. no choice. 

Anyway, keep the money if you see 'no flower' to pay the interest.

Mine is Maybank and was told there's penalty involve if I want to settle the payment earlier.

Ya lor.  What to do.  Mine is UOB.  That means TCM got tie-up with at lesat two banks.  I thought it has only one in-house finance partner and one in-house insurance partner.  Looks like it is true only for the latter.

[ashocker]

K, just sharing my knowledge, so dun shoot me ya :)

1. For car industry in Singapore, the car loans are "monopolised" by the car agents. You cannot go to the financial institution directly (unless they do not have any tie-ups with the finance institution you are interested in, which is rare).

2. Each of the package offered by the financial institutions are different from time to time. Eg, you may be offered package A on Wk1, but come Wk2, the offer may be different. Also certain agent may be close to certain financial institution thus may seem as thought they are promoting a particular financial institution (probably because of higher commision or better package/deal offered). Eg - my loan for my Latio was from Maybank.

3. There is rarely such thing as in-house financing. Reason is because of expertise - car companies are experts in selling cars, not managing car loans. What they do instead is to tie up with a financial institution to package a loan for them - ie on the front may seems as though the car company is offereing the loan, but at the back is actually a particular bank that administer. Not sure if you recall there was once this case where the customers pay the money to a car company that closed shop, and are surprised to find out that the bank has siezed their car as the car company did not make payment to the bank.

4. The margin earned by the bank is much lower than you all think. That is why we always say, pls squeeze the car agent as much as possible for incentive to buy from them. And that is also why the banks usually discourage early-repayment.

5. It is not the bank that cheats you, but the poor service of the car agents. As I explained earlier, there is no way the bank can inform customers as the loans are offered by the car agents. As such, we have to trust the agents to be upfront when offering the loan to us. For me, I read thru all the clauses first before signing. The agent? Of course she is more interested to sign the doc and just tried to brush aside, say it is the usual T&Cs. And yes, Maybank's also have this 20% clawback clause back then.

6. Do plan your maths properly before shopping for a car. Only take as much as you need and do not drag the loan over too long a period. That way, you will not find yourself breathless trying to make ends meet... Nothing is free - some of the free stuff is by the car company, while some are packaged into the loan, thus reason why some bro find their car loaded with free stuff when take a 10yrs loan compared with someone who takes a 1yr loan.