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Preclosure charges on total loss car

(Querist) 27 February 2024 This query is : Resolved 
I purchased a car on Nov 10 2023, on Dec 5 2023 due to floods it was completely drowned and was declared a total loss. Upon informing the bank I was asked to close the loan and go for a new loan if I want to buy a new car. I asked them to get the new car hypothecated with the same loan but they denied it and asked to close the loan. Now when the insurance company is paying, they are also demanding 5.21% as foreclosure charge. I also mentioned them that I have taken a new loan for the same amount from them (Kotak Prime) but still they are asking me to pay additional charge (5.21% + taxes, around 1.5 lakhs).
I have raised this in Ombudsman but Kotak Prime is replying the same even after that.

If anyone could help me with this I would be very grateful and thanks in advance
T. Kalaiselvan, Advocate (Expert) 28 February 2024
If the acts of the Kotak company is unjustified then you can approach consumer commission with a complaint against the Kotak for their unfair trade practice and get the relief as per the consumer protection act
Yash Burad (Querist) 28 February 2024
Thank you for your reply Mr. Kalaiselvan. As I have mentioned that I have raised this issue in RBI ombudsman so should I wait until it is closed over there or not?
Yash Burad (Querist) 28 February 2024
Thank you for your reply Mr. Kalaiselvan. I would like to know whether I can file a complaint or not since I am not sure whether my situation comes under the prepayment clause of Kotak prime or not. And if they don't then how can I file a complaint? Once again thanks for your reply

Yash Burad (Querist) 28 February 2024
And I would like to know one more thing that is the payment by the insurance company as a settlement for my totalled vehicle should not come under the prepayment category as it was not made by the borrower, am I right?
T. Kalaiselvan, Advocate (Expert) 28 February 2024
The insurance compensation was made by the insurance company based on the insurance policy purchased on the car, this has got nothing to do with the loan obtained from the lender in this regard.The loan obtained from the lender will be governed by the rules and terms and conditions of the loan, hence your claim that the car is under total loss may not be entertained even though you state a genuine reason.
Your obligations towards repayment of car loan will be under the conditions of the loan, therefore you may not get a favorable reply from RBI ombudsman too if at all you get one.
In my opinion your plea may not fetch any succor even if you would desire to escalate the matter legally
Yash Burad (Querist) 29 February 2024
So you mean to say that I have to pay the charges for foreclosure even though I am not getting full money from the insurance company.

Just for your reference, I purchased the car for an approximate value of 29 lakhs(out of which 24 lakhs was bank loan) and insurance company is giving me 20.5 lakhs and bank is asking remaining 3.5 lakhs plus 1.5 lakhs in the name of fore closure charge.

I agree that I have to pay 3.5 lakhs but, according to you, I am supposed to give that additional 1.5 lakhs too, am I right sir?
T. Kalaiselvan, Advocate (Expert) 29 February 2024
Your understanding is right because Bank is demanding the additional charges towards pre closure charges as per terms of agreement.
However you can request the bank manager to use his discretion to waive the additional charges for the reason that the loan did not serve any purpose at all and that he can help you by waiving at least 50%of the additional charges if he's got no power to waive entire amount.
Try to maximum extent, if you are getting a discount to a portion of amount then also it is a profit to you.
Yash Burad (Querist) 29 February 2024
But I guessed that there were chances of completely waiving off the additional charges since this must not come under the prepayment category as it is a settlement by the insurance and not a payment by the borrower.

Anyways thank you once again
T. Kalaiselvan, Advocate (Expert) 29 February 2024
The insurance company has no agreement with the bank in this regard.
It is the car buyer who purchased the car from a dealer and the insurance policy from an insurance company through the loan granted by the bank.
So all these three characters are involved in single product called car but for different reasons and all the three are having a common customer, i.e., the car purchaser.
Hence you cannot interlink insurance company to the lender bank.

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