I took a Rs 11 lakh car loan 7 years ago. Should I switch to a lower EMI personal loan now?
If you're considering switching from a car loan to a personal loan for lower EMIs, think twice. A lower monthly outflow might seem attractive, but hidden charges and higher interest can offset any short-term savings.
- Jul 29, 2025,
- Updated Jul 30, 2025 4:41 PM IST
I took an Rs 11 lakh car loan at 9.3% for 7 years (Rs 18K EMI) in Jan this year, and prepaid Rs 4 lakh. Now the tenure is ~4 years. SBI allows flexible, charge-free prepayments. HDFC is offering a personal loan at 11.52% — Rs 6.25 lakh for 5 years at Rs 13K EMI. I’d save ~Rs 5K/month but pay Rs 2 lakh interest if I hold it full term. I plan to close the loan this year, so flexibility matters. SBI has 0 prepayment charges after 1 year, HDFC has foreclosure charges + 18% GST. Should I stick with SBI and wait 2–3 months to close, or switch and take the upfront savings?
Advice by Dev Patel, Quantitative Research Analyst at 1 Finance
You've made a smart move by prepaying Rs 4 lakh on your SBI car loan. This significant prepayment has already reduced your total interest payable by approximately Rs 2.3 lakh and brought your outstanding loan tenure down to around 41 months, while keeping your EMI at Rs 18,000. Your current outstanding balance is approximately Rs 6.3 lakh.
Taking the HDFC Personal Loan primarily for a lower EMI while planning to close it quickly isn't recommended. The immediate Rs 5,000 monthly EMI saving is appealing, but the higher interest rate of the personal loan (11.52%), combined with its 2% - 5% prepayment/foreclosure charges + 18% GST, will likely result in a higher overall cost for you when compared to waiting 5 more months to close your SBI loan without penalty.
If your main concern is reducing your monthly cash outflow by ₹5,000 for consumption, you could explore approaching SBI to restructure your loan (reduce EMI and extend tenure) with a nominal processing fee. This option would not make sense if your ultimate goal was to close the loan as quickly as possible.
SBI car loans typically carry a 3% + GST foreclosure charge. If you close your Rs 6.3 lakh outstanding loan now, you will incur a penalty of Rs 22,408. Alternatively, paying the next 5 EMIs until the penalty-free period begins (if applicable), you would be paying Rs 23,519 in interest.
Your best course of action is to immediately verify SBI's foreclosure terms and charges for your car loan directly with your branch manager. If SBI confirms 0% foreclosure charges after 12 months (from January 2026), it's highly advisable to continue with your current SBI car loan and close it as per your convenience.
Personal loan
Borrowing has become a routine part of consumer financial behaviour—whether it’s for buying a car, a home, consumer durables, or meeting personal expenses, taking a loan is often the go-to solution. Personal loans can help meet a variety of financial needs. These are called "unsecured loans" because they don’t require you to pledge any asset as collateral, unlike home or car loans. They’re also quick and convenient to access.
While interest rates on personal loans depend on several factors such as your CIBIL score, repayment history, loan amount, and tenure, it’s crucial to compare rates across different lenders—both banks and NBFCs. Even a small difference in rates can have a significant impact on your overall repayment amount.
CRIF High Mark’s latest annual report, How India Lends: Credit Landscape in India FY2025, outlines key trends in the borrowing patterns of Indian consumers.
One of the key highlights: the personal loan portfolio outstanding (POS) rose from Rs 10.7 lakh crore to Rs 14.6 lakh crore over the past two years. However, the year-on-year growth slowed significantly, from 25.2% in FY2024 to just 9.1% in FY2025.
In terms of lender distribution, notable shifts have occurred. The share of non-banking financial companies (NBFCs) in personal loans grew from 27.6% in 2023 to 36.4% in 2025. Meanwhile, private banks saw their share fall from 32.5% to 29.2%, and public sector banks (PSUs) experienced a drop from 35.3% to 30.5% during the same period.
The report provides comprehensive insights into loan originations, portfolio size, and delinquency trends across major credit product categories, reflecting how the lending landscape in India continues to evolve.
I took an Rs 11 lakh car loan at 9.3% for 7 years (Rs 18K EMI) in Jan this year, and prepaid Rs 4 lakh. Now the tenure is ~4 years. SBI allows flexible, charge-free prepayments. HDFC is offering a personal loan at 11.52% — Rs 6.25 lakh for 5 years at Rs 13K EMI. I’d save ~Rs 5K/month but pay Rs 2 lakh interest if I hold it full term. I plan to close the loan this year, so flexibility matters. SBI has 0 prepayment charges after 1 year, HDFC has foreclosure charges + 18% GST. Should I stick with SBI and wait 2–3 months to close, or switch and take the upfront savings?
Advice by Dev Patel, Quantitative Research Analyst at 1 Finance
You've made a smart move by prepaying Rs 4 lakh on your SBI car loan. This significant prepayment has already reduced your total interest payable by approximately Rs 2.3 lakh and brought your outstanding loan tenure down to around 41 months, while keeping your EMI at Rs 18,000. Your current outstanding balance is approximately Rs 6.3 lakh.
Taking the HDFC Personal Loan primarily for a lower EMI while planning to close it quickly isn't recommended. The immediate Rs 5,000 monthly EMI saving is appealing, but the higher interest rate of the personal loan (11.52%), combined with its 2% - 5% prepayment/foreclosure charges + 18% GST, will likely result in a higher overall cost for you when compared to waiting 5 more months to close your SBI loan without penalty.
If your main concern is reducing your monthly cash outflow by ₹5,000 for consumption, you could explore approaching SBI to restructure your loan (reduce EMI and extend tenure) with a nominal processing fee. This option would not make sense if your ultimate goal was to close the loan as quickly as possible.
SBI car loans typically carry a 3% + GST foreclosure charge. If you close your Rs 6.3 lakh outstanding loan now, you will incur a penalty of Rs 22,408. Alternatively, paying the next 5 EMIs until the penalty-free period begins (if applicable), you would be paying Rs 23,519 in interest.
Your best course of action is to immediately verify SBI's foreclosure terms and charges for your car loan directly with your branch manager. If SBI confirms 0% foreclosure charges after 12 months (from January 2026), it's highly advisable to continue with your current SBI car loan and close it as per your convenience.
Personal loan
Borrowing has become a routine part of consumer financial behaviour—whether it’s for buying a car, a home, consumer durables, or meeting personal expenses, taking a loan is often the go-to solution. Personal loans can help meet a variety of financial needs. These are called "unsecured loans" because they don’t require you to pledge any asset as collateral, unlike home or car loans. They’re also quick and convenient to access.
While interest rates on personal loans depend on several factors such as your CIBIL score, repayment history, loan amount, and tenure, it’s crucial to compare rates across different lenders—both banks and NBFCs. Even a small difference in rates can have a significant impact on your overall repayment amount.
CRIF High Mark’s latest annual report, How India Lends: Credit Landscape in India FY2025, outlines key trends in the borrowing patterns of Indian consumers.
One of the key highlights: the personal loan portfolio outstanding (POS) rose from Rs 10.7 lakh crore to Rs 14.6 lakh crore over the past two years. However, the year-on-year growth slowed significantly, from 25.2% in FY2024 to just 9.1% in FY2025.
In terms of lender distribution, notable shifts have occurred. The share of non-banking financial companies (NBFCs) in personal loans grew from 27.6% in 2023 to 36.4% in 2025. Meanwhile, private banks saw their share fall from 32.5% to 29.2%, and public sector banks (PSUs) experienced a drop from 35.3% to 30.5% during the same period.
The report provides comprehensive insights into loan originations, portfolio size, and delinquency trends across major credit product categories, reflecting how the lending landscape in India continues to evolve.