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Ask Mint | Bank car loans cost less, take more time

Ask Mint | Bank car loans cost less, take more time
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First Published: Mon, Jan 04 2010. 09 43 PM IST

Updated: Mon, Jan 04 2010. 09 43 PM IST
I lost my job recently due to a mass layoff. I have a car loan for Rs3 lakh and a home loan for Rs20 lakh. I am managing to pay off my home loan from my savings but am unable to keep up with my car loan commitment. What will happen if I don’t pay my car loan temporarily? Can I do something about it?
Angeline Fernando
Angeline, I know times are tough now but things are improving and I am sure this is just a temporary setback you are facing. In finance matters, prompt action leads to the best results. If you are unable to keep up your car loan commitment, the first thing you need to do is to talk to the bank and request it to permit you to hold off EMI payments until you get a job. If the bank does not agree, you could think of liquidating some of your existing assets to repay the loan.
You could also approach credit counsellors such as Abhay and Disha, initiatives by the Union Bank of India and ICICI Bank Ltd, respectively. “Arms” is another organized retail loan recovery and resolution initiative set up to help distressed borrowers who seek a solution to settle loan defaults in a mutually beneficial manner. This is run by Asset Reconstruction Co. of India, which is jointly backed by ICICI Bank, State Bank of India and IDBI Bank Ltd. Arms might be a good idea as it analyses the customer’s current financial situation and tries to negotiate with the bank once they realize that there is no other solution in sight. Credit counselling is a relatively new trend that is catching up fast especially during this time of mass layoffs, when people with big loan commitments suddenly find themselves in a fix.
Don’t leave this issue unattended or the loan default could lead to your car being impounded. This will affect your credit rating and make it difficult for you to obtain loans in the future or make them very expensive. So I would urge you to take up the matter with the bank concerned at the earliest.
I am planning to buy a Maruti Swift. My dealer has a tie-up with only HDFC Bank and Kotak Bank, but I have been told that public sector banks offer car loans at a much cheaper rate. Can I approach a bank directly? Will I face any problems if I do so? Alternatively, how can I negotiate for a better deal?
Shankar Chouhan
You are free to approach the bank of your choice. Most dealers offer an insurance premium waiver option or cash discounts to make the loan offer attractive, but it is better to cross-check and compare total loan cost. Sometimes finance arranged through dealers could turn out to be more expensive. Approaching the bank directly has its drawbacks as well as benefits. Banks could take more time to process the loan, but rates will be cheaper. You can also go to independent finance companies that specialize in car finance for faster approvals and prompt service.
Queries and views at feedback@livemint.com
Adhil Shetty is the CEO and co-founder of www.BankBazaar.com
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First Published: Mon, Jan 04 2010. 09 43 PM IST