Bad experience with OCBC motor loan

[highsulphur]

Did check with the ocbc staff referred by the car company as well as called in the hot line to ask about the penalties of early redemption. Thought I got the whole picture but got a surprise when I asked for early redemption a few days after the loan was disbursed.

While calculating the 20% penalty on unearned interest, they came up with the implied interest of almost $750 even though I asked just a few days after the loan was disbursed.

Not sure how I was charged almost $750 of interest based on a loan amount of 100k (7 years) at 2.28% within one month.

Anyway will just pay and end this contract.

 

[limster]

Are you using Rule of 78 to calculate what you need to pay to redeem early?

I fed your numbers into Claude and ask it to assume the 1% penalty is waived and only Rule of 78 applies. Claude said you have to pay $2,111.95 if redeem after 1 month.

Anyway, congrats on getting a new car. I'm glad I got mine 3 years ago when COE was still $100k

So you'd pay $2,111.95 in interest for just one month of having the loan — even though your scheduled monthly instalment is only $1,380.48. This is the Rule of 78 in action: because interest is front-loaded, the bank claws back very little in the first month, and the 20% they keep of the rebate adds further cost on top.


This illustrates why early redemption is most punishing in the first year — you end up paying a large chunk of the total 7-year interest ($15,960) almost immediately, despite barely having used the loan.

 

[highsulphur]

Are you using Rule of 78 to calculate what you need to pay to redeem early?

I fed your numbers into Claude and ask it to assume the 1% penalty is waived and only Rule of 78 applies. Claude said you have to pay $2,111.95 if redeem after 1 month.

Anyway, congrats on getting a new car. I'm glad I got mine 3 years ago when COE was still $100k

With the 1% penalty, I have to pay 104,7xx

Yes the rule of 78 applies