How to part-prepay your car loan

Use our DIY (do it yourself) services and part-prepay your ongoing car loan from the comfort of your home.
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How to part-prepay your car loan
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5 min read
18 January 2024

Car loan part prepayment procedure

Bajaj Finance makes the purchase of your car easy by offering car loans tailored to your needs. If you wish to buy a pre-owned car, you can opt for a used car loan or choose new car finance to purchase a brand-new car.

Both these car loans – used car loans and new car finance come with simple eligibility criteria and minimal documentation. Apart from making your borrowing experience hassle-free, Bajaj Finance also provides digital customer services to help you manage your ongoing car loan repayment.

If you have an ongoing used car loan or new car finance, you can repay it in small monthly instalments. These EMIs (equated monthly instalments) are deducted from your registered bank account. However, Bajaj Finance offers a host of online loan payment services on the customer portal . These include part-prepayment, overdue EMI payment, advance EMI payment, and foreclosure.

If you have surplus funds and you wish to part-prepay your car loan, you can follow these simple steps to make part-prepayment.

  • Click on the ‘Sign-in’ button on this page to go to our customer portal.
  • Enter your registered mobile number and the OTP to sign-in.
  • Verify your details by entering your date of birth and proceed.
  • Select the loan account for which you want to part-prepay your loan.
  • Choose ‘Part-prepayment’ from the list and proceed.
  • Enter the required details, review additional charges if applicable and proceed to make payment.

Important points to consider before pre-closing your car loan

  • Evaluate the pre-closure charges
    Most lenders impose a pre-closure or foreclosure charge, which is usually a percentage of the outstanding loan amount. Check with your lender to understand these charges, as they can impact the total cost of closing the loan early. Calculating these fees will help you assess if pre-closure is financially beneficial.
  • Understand the impact on your credit score
    Pre-closing a car loan can affect your credit score positively, as it reduces your debt obligations. However, it might also shorten your credit history, especially if the loan had been active for a shorter period. Ensure that the benefits of pre-closure outweigh any minor impacts on your credit score.
  • Assess your financial goals
    Before paying off the remaining loan amount, consider if this aligns with your current financial goals. For instance, if you have investments yielding higher returns than the car loan’s interest rate, it might be better to keep the loan active. Alternatively, if you're seeking peace of mind and debt reduction, pre-closure can be advantageous.
  • Check if partial prepayment is an option
    Some lenders allow partial prepayments, which reduces the outstanding loan amount without fully closing the loan. Partial prepayment can lower your EMIs, lessen the interest burden, and allow you to maintain the loan for credit-building purposes. Verify if this option is available before proceeding with full pre-closure.
  • Calculate potential interest savings
    Pre-closing the loan can save a significant amount of interest, particularly if your loan term is long and you’re in the early stages of repayment. Calculate the total interest saved by closing the loan early to understand its impact on your finances and decide if it justifies the pre-closure fees.
  • Review any changes to insurance and warranties
    Some car loans come with bundled insurance or extended warranties. Pre-closing the loan could affect these arrangements, so check with your lender and insurance provider to confirm if these benefits remain intact or if they will need adjustments.
  • Check for additional documentation requirements
    Loan pre-closure typically requires additional paperwork, including a no-objection certificate (NOC) from the lender. Prepare for any necessary documentation and processing time to ensure a smooth closure process.

Benefits of car loan prepayment online

  • Convenience and ease of access
    Making a prepayment online is convenient and saves time. You can initiate the payment from anywhere, eliminating the need to visit the lender’s branch. This seamless access enables you to manage finances more efficiently.
  • Immediate reduction in interest burden
    Prepaying your car loan online can lead to an immediate reduction in the interest payable over the loan term. By reducing the outstanding principal amount, you minimise the interest accrued, resulting in potential savings on the overall loan cost.
  • Quicker loan closure
    Online prepayment allows you to close your car loan faster, freeing you from future monthly instalments. This can provide a sense of financial freedom and enable you to allocate funds towards other financial goals or investments.
  • Enhanced credit score
    Paying off a loan partially or entirely demonstrates financial responsibility, which can positively impact your credit score. Successful loan prepayment shows lenders that you’re a reliable borrower, improving your creditworthiness for future loans or credit applications.
  • Reduced debt-to-income ratio
    Car loan prepayment lowers your outstanding debt amount, thereby reducing your debt-to-income ratio. This improved ratio enhances your financial profile, which can make it easier to qualify for other loans or credit products in the future.
  • Control over loan tenure and EMIs
    With online prepayment, you have the option to either reduce your loan tenure or lower your monthly EMIs. This flexibility enables you to optimise your monthly budget, depending on your financial goals and cash flow requirements.
  • Minimal paperwork and faster processing
    Online prepayment minimises paperwork, making the process more streamlined and reducing the processing time. This fast-tracked approach ensures that your loan prepayment is completed swiftly, with fewer administrative hurdles.

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You can also part-prepay your loan by downloading our app. Visit the Play Store or the App Store and get the Bajaj Finserv app today.

Part-prepayment means to repay a portion of the outstanding principal before the scheduled due date. Part-prepaying your loan helps either in reducing the EMI or tenure. This also helps in repaying your loan faster and becoming debt-free early. However, please note that if you choose to part-prepay your loan, you might need to pay additional charges.

Disclaimer

1. Bajaj Finance Limited (“BFL”) is a Non-Banking Finance Company (NBFC) and Prepaid Payment Instrument Issuer offering financial services viz., loans, deposits, Bajaj Pay Wallet, Bajaj Pay UPI, bill payments and third-party wealth management products. The details mentioned in the respective product/ service document shall prevail in case of any inconsistency with respect to the information referring to BFL products and services on this page.

2. All other information, such as, the images, facts, statistics etc. (“information”) that are in addition to the details mentioned in the BFL’s product/ service document and which are being displayed on this page only depicts the summary of the information sourced from the public domain. The said information is neither owned by BFL nor it is to the exclusive knowledge of BFL. There may be inadvertent inaccuracies or typographical errors or delays in updating the said information. Hence, users are advised to independently exercise diligence by verifying complete information, including by consulting experts, if any. Users shall be the sole owner of the decision taken, if any, about suitability of the same.

Frequently asked questions

Can I pay part payment for a car loan?

Yes, many lenders allow part payments on car loans, which can help reduce the outstanding principal and, consequently, the interest burden. This option offers flexibility as you can lower future EMIs or shorten the loan tenure without fully closing the loan. It’s advisable to check with your lender for any restrictions or charges associated with making part payments on a car loan.

Is it advisable to prepay a car loan?

Prepaying a car loan can be beneficial, especially if done early in the loan term when the interest component is higher. It reduces the total interest paid over the tenure and frees up funds for other financial goals. However, it’s essential to evaluate prepayment fees and consider your financial priorities before proceeding, as it may not always be the best choice.

What is the penalty for prepayment of a car loan?

The prepayment penalty for car loans varies by lender, typically ranging between 2-5% of the outstanding amount. Some lenders charge a higher penalty if prepayment is done within the first few years of the loan tenure. It’s essential to check your loan agreement or consult your lender to understand the exact prepayment charges applicable to your car loan.

Does prepayment of car loan affect CIBIL score?

Yes, prepaying a car loan can impact your CIBIL score positively as it reduces your debt obligation, indicating responsible credit behaviour. However, closing a loan early may shorten your credit history, especially if it’s a recent loan. The effect is generally minor, and overall, timely prepayments demonstrate financial responsibility, which can benefit your credit score in the long run.

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