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I had purchased a car with a loan (24 lakhs) in November 2023, but the car got totaled due to floods in December 2023. The insurance company asked for my bank details to disburse the amount. When I informed the bank, I was told that I need to pay an additional 1.5 lakhs as foreclosure charges on top of the outstanding amount. According to me, it is the bank's duty to close the loan because the security for which the loan was granted has now been totaled. Hence, I should not be made to pay this additional amount. Am I right? What should I do in this situation?
If your car was totaled, the insurance should ideally settle the loan balance. However, the bank may charge foreclosure fees. Check the terms of your loan agreement; banks often charge for early closure. You can negotiate with the bank or approach a legal advisor if you feel the charge is unfair. For further legal assistance contact us on our helpline number.