Settlement value

[blunomore]

Our vehicle finance statement indicates a settlement amount. It also says that this is only an indication and for a quote, we should call them.

Is there a penalty for early settlements of these loans?

Thanks

 

[undesign]

I haven't read your contract. Maybe you should?

It's usually three months notice, but this can differ from bank to bank and product to product.

 

[blunomore]

I haven't read your contract. Maybe you should?

It's usually three months notice, but this can differ from bank to bank and product to product.

I wanted advice, not particularly on the notice period but on whether, generally speaking, there is a penalty for early settlement of vehicle finance

 

[undesign]

I wanted advice, not particularly on the notice period but on whether, generally speaking, there is a penalty for early settlement of vehicle finance

Well now you got the advice. A notice period can safely be construed as positively affirming early settlement penalties.

 

[Ecco]

You should be able to settle earlier without penalty. Infact, you should be getting a reduced settlement for settling earlier. Its not that much, but still helps.

Ps. this was the case for my vehicle, financed by Standard Bank VAF. Might be different for different banks.

 

[superskully]

Our vehicle finance statement indicates a settlement amount. It also says that this is only an indication and for a quote, we should call them.

Is there a penalty for early settlements of these loans?

Thanks

What Siris is trying to say that your penalty is your notice.
So if you want to settle now, its a 3 month notice = 3 months interest penalty.
However, this is only if you bought before NCA (think 2008). After NCA it became a 5 day notice = 5 day interest penalty. (Crooked banks)

 

[blunomore]

You should be able to settle earlier without penalty. Infact, you should be getting a reduced settlement for settling earlier. Its not that much, but still helps.

Ps. this was the case for my vehicle, financed by Standard Bank VAF. Might be different for different banks.

Thank you catweasel. Finally a decent answer

 

[wise_guy]

@blunomore.I doubt the bank would penalise you for wanting to settle any debt you have with them.Maybe this penalty is the deposit fee on the balance.

 

[blunomore]

What Siris is trying to say that your penalty is your notice.
So if you want to settle now, its a 3 month notice = 3 months interest penalty.
However, this is only if you bought before NCA (think 2008). After NCA it became a 5 day notice = 5 day interest penalty. (Crooked banks)

Thanks for the logical explanation and the help superskully

We bought before 2008 so looks like we are in luck in this case !

 

[superskully]

You should be able to settle earlier without penalty. Infact, you should be getting a reduced settlement for settling earlier. Its not that much, but still helps.

Ps. this was the case for my vehicle, financed by Standard Bank VAF. Might be different for different banks.

Remember a settlement is different from a balance.
What the OP is talking about is the statement which provides you with both figures. Your settlement will be higher than the statement as interest is added on (i.e. unless you make another payment).

 

[superskully]

Thanks for the logical explanation and the help superskully

We bought before 2008 so looks like we are in luck in this case !

Actually out of luck - as i meant that before the NCA there was a 3 month penalty (my bank was STD bank - not sure abt others). After NCA it became 5 days.

 

[superskully]

Actually out of luck - as i meant that before the NCA there was a 3 month penalty. After NCA it became 5 days.

Although if you bought so long ago, i am guessing that your interest penalty is not so much.
This is what i did for a car i bought in 2007. Worked it out myself using Excel Loan amortization. And the settlement was 6k higher - bank told me cos its a 3months notice, also told me though that NCA has changed it now to 5 days. Sold a car at the start of the year and settlement was similar to what i calculated.

 

[McGuywer]

Although if you bought so long ago, i am guessing that your interest penalty is not so much.
This is what i did for a car i bought in 2007. Worked it out myself using Excel Loan amortization. And the settlement was 6k higher - bank told me cos its a 3months notice, also told me though that NCA has changed it now to 5 days. Sold a car at the start of the year and settlement was similar to what i calculated.

So it was/is actually cheaper to monthly pay off the vehicle?

Does fluctuating interest rates alter the settlement value?

 

[Voicy]

Hi Mrs Blu,

I was in a similar situation 3 weeks ago with ABSA.

I still had about a year left on my loan. I went to the bank, phoned their VAF branch from there to get a settlement figure and did a deposit in-bank. A week later they sent my my transfer of ownership papers etc. complete. Took it to the traffic dept last week and car was in my name 20mins and R87* later.

With the new credit act they can no longer penalize you.

* I think it's R87, but I speak under correction.

 

[BigVan99]

My last three car I settled, I only had to settle the outstanding capital. Investec and Standard Bank. Negotiate with your bank.

 

[undesign]

NCA-

Consumer’s or guarantor’s right to settle agreement
5
or series of specified dates- 10
subsection, of the charge or charges to be made under that authorisation. 20
125. (1) A consumer or guarantor is entitled to settle the credit agreement at any time, 25
(2) The amount required to settle a credit agreement is the total of the following
with or without advance notice to the credit provider.
amounts:
(a) The unpaid balance of the principal debt at that time;
(b) the unpaid interest charges and all other fees and charges payable by the 30
consumer to the credit provider up to the settlement date; and
(c) in the case of a large agreement-
(i) at a fixed rate of interest, an early termination charge no more than a
prescribed charge or, if no charge has been prescribed, a charge
(ii) other than at a fixed rate of interest, an early termination charge equal to
no more than the interest that would have been payable under the
agreement for a period equal to the difference between-
(aa) three months; and
(bb) the period of notice of settlement if any, given by the consumer.

I haven't read the act further - I'm guessing installment sale agreement falls under "credit agreement" and mortgage loans under "large agreements".

 

[superskully]

So it was/is actually cheaper to monthly pay off the vehicle?

Does fluctuating interest rates alter the settlement value?

Interest is always highest in the first year than the last. Think about it this way:
1st year: yr car is 200k, u paying interest on that 200k. So first installment is 5k - i.e. 3k interest on the 200k, 2k capital.
Next month u pay 5k - then interest is now on 198k - so say 2.1k off capital and 2.9k interest.
So it continues in that fashion and in the last year u owe like 50k capital and pay interest on that 50k only - so tahts why i say interest is small relative to the interest you are paying at the start.
Changes in interest rate only changes your installment as the interest portion will change.

Use Excel Loan Amortization - and that will give you exact figure.

 

[superskully]

Hi Mrs Blu,

I was in a similar situation 3 weeks ago with ABSA.

I still had about a year left on my loan. I went to the bank, phoned their VAF branch from there to get a settlement figure and did a deposit in-bank. A week later they sent my my transfer of ownership papers etc. complete. Took it to the traffic dept last week and car was in my name 20mins and R87* later.

With the new credit act they can no longer penalize you.

* I think it's R87, but I speak under correction.

But i think it depends when you bought the car, otherwise i am going to claim from STD bank my 6k penalty (bought the car before NCA) but settled after NCA.

 

[superskully]

NCA-



I haven't read the act further - I'm guessing installment sale agreement falls under "credit agreement" and mortgage loans under "large agreements".

Yep i think you write. Quite sure there is no 3 month penalty after NCA.
But i beleive there is one for the mortgages - can anybody confirm this - as 3 months interest on a house is a lot.

 

[superskully]

My last three car I settled, I only had to settle the outstanding capital. Investec and Standard Bank. Negotiate with your bank.

As far as i remember, negotiations can only take place if you finance again with the bank.
Also check to see if your settlement is the same as what you what calculate. You will notice a 3 month interest addition before the NCA.