Should I prepay home loan before taking new car loan?

POSTED BY Navneet Kesarkar ON July 26, 2013 1:48 pm COMMENTS (5)

I am planning to buy a new car.. Here are some financial details of mine:

Balance Home loan: 3,28,000/- (Tenure of 4 yrs+ approx @ 10.25%, EMI 8k+)

Cash in hand: 2,00,000/-

Home loan Prepayment already done: 1,50,000/- (IDBI) Takes care of this yrs tax

Expected Car Loan Rate: 10.5% (SBI)

I am confused between Home loan prepayment Vs Downpayment of Car.

Cash in hand is not sufficient to settle home loan completly. Should I go for New Car this year and use my next few months saving to prepay home loan next year so that I can benefited on tax too? Or I finish my home loan completly so that I can go for bigger Car next year. I do own a Santro right now.

5 replies on this article “Should I prepay home loan before taking new car loan?”

  1. Navneet Kesarkar says:
    July 29, 2013 at 2:45 pm

    Hi Ashal,

    Thanks for the reply..

    I have Term, Health Insurance. Also covered for Accidental Policy. For Retirement I am saving 8k per month in mutual funds (IDFC, HDFC). Also same amount savings from my wife’s account in Reliance and IDFC. My existing car is 12 years old and need to change ASAP else there will be no resale value at all.
    My Confusion/option are..
    1) Prepay home loan using my saving & then take a car loan with minimum down payment 2 months later (No tax benefit as its already over for this year)
    2) or go for car loan now and take tax benefit of home loan next year.

    Reply
  2. Ashal Jauhari says:
    July 27, 2013 at 10:38 am

    Dear Navneet, just wait for a while & do tell me what is the position of your retirement planning & other financial goals?

    thanks

    Ashal

    Reply
  3. Free Financial Calculators says:
    July 26, 2013 at 5:27 pm

    If you already own a car, why such a hurry to get a new one? Let the home loan run its course. You could then plan for a car.

    Buying a new car with a loan is probably the worst thing to do
    Have a look:
    http://freefincal.com/loandebt-calculators/think-before-taking-a-car-loan/

    Always get a second hand car with saved up funds.

    Reply
  4. Biswa Singh says:
    July 26, 2013 at 5:20 pm

    I would prepay the home loan first and wait for a year to buy car. One loan at a time is better to manage and it will be car loan the EMI will be much lesser and you will be able to prepay it easily if required.

    Reply
  5. Reji m says:
    July 26, 2013 at 2:47 pm

    Car loan is expensive in comparison with the Homeloan. So I think it would be a good idea to use your saving for purchasing the car.

    Reply

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