I had taken a car loan of Rs 4 lakh in January 2010. Is it wise to prepay the entire outstanding amount? If yes, please tell me the process involved and charges to be paid.
Vishal Rathod, Via email

You can certainly prepay the loan, but before doing that you need to check with your bank if there are any prepayment charges for the same. Please read your loan agreement thoroughly to check whether the original agreement had the prepayment penalty clause. In case your bank has a prepayment clause, then you will have to pay a penalty for prepaying the loan. It is generally in the range of three to five per cent of the outstanding loan amount.

Once you have paid off the entire principal amount, you need to collect the final settlement letter from the bank, which will state that you have foreclosed your loan. You will also need to get the NOC signed by the bank to get the endorsement removed from the registration document of the vehicles.

Similarly, you will need a no dues and clearance certificate from them to get their name removed for the insurance policy of the car. As far as your query is concerned, it is advisable to prepay the entire loan outstanding, the answer would depend on whether you have spare funds available, which can be used for prepayment of the loan, which you will not need in immediate future.

* Do banks in India have recourse to a borrower’s other assets in case he defaults and the mortgaged property also falls in value?
Rajashekhar Nanduri, Via email

If the full loan amount is not recovered from the sale of the mortgaged property, the bank can still file a suit against you for the recovery of the balance amount. Of course, the amount due after selling off the mortgaged property will be treated like an unsecured loan.

* I want to invest Rs 14,400 yearly in an insurance plan. I want my money to double in six years. Please advise me that which insurance company fits my bill?
G. Kishore Reddy, Via email
Doubling of your money in six years means a return of 12.25 per cent, which will not be available as a guaranteed return in any instrument. In fact, if you buy a unit-linked insurance policy or Ulip for investment purpose, there will be various charges like mortality, premium allocation and policy administration charges and others, which will make that return very difficult to achieve. A traditional insurance policy is unlikely to give a return of more than six per cent. Your best chance to get a return of 12.25 per cent is to try investing in a balance mutual fund on a monthly basis. Please remember the return is not guaranteed. Ideally, you should invest after taking proper financial advice. Please keep one basic principle in mind. Never combine insurance and investment.

* I am a Central government employee and draw a monthly salary of close to Rs 80,000. I have received a lump sum amount of Rs 18 lakh. I already have a group insurance of Rs 50 lakh. My wife, who is on sabbatical, plans to work from next year onwards. I already have a home worth Rs 40 lakh for which I have taken a loan of Rs 25 lakh. I have some ancestral property, which could be sold later. Could you advice me the best way to invest the money that I have received as lump sum.
G. Umashankar, Via email

The risk-free way to invest of course is to prepay your home loan though it could be a less than optimal solution. You need to do a complete review of your existing investments, liabilities, goals and insurance to decide on the best way to invest, which is in tune with your overall investment strategy.

(Harsh Roongta is the CEO of Apnapaisa.com. You can send in your queries to movingmoney
@deccanmail.com)