P Gupta (practice) (75 Points)
30 March 2009Hi,
Few years ago I took loan for the property. If I repay the loan then I have to pay the penalty. Isn't it? Isn't it the case with all the banks/institutions?
If I sell the property now, do I have to repay the loan in that case or I can continue to keep the loan? If I have to clear out the loan after selling the property, then I would like to know if I have to pay penalty in this case as well?
Thanks in advance for your kind answers.
deepak K Gujrati
(CA-practice)
(966 Points)
Replied 31 March 2009
It appears that you are refering to commitment charges payable for repayment of principal before it becomes due.
Such penalty is not payable in every case. It depends on the agreement.
Also if you want to sale the property you will have to repay the loan first.
P Gupta
(practice)
(75 Points)
Replied 31 March 2009
Dear Mr. Deepak,
Thanks for the reply.
Well, I don't know if I fully understood you. I took the loan because I had no money. Now I have the property for which I took the loan and I want to sell it. I still have no money so how can I repay the loan before selling the property. I can repay but only after I receive money from the buyer. Isn't it? Based on what you have written I can never sell my property till I have money in hand to repay my loan. I doubt this is the case or I mis-understood.
As I know there is a kind of agreement that allows the owner to sell and repay the loan after the sale. Or probably buyer is paying a part of the deal to the bank and rest to the seller. These scenarios look more realistic too.
But my question is not about repayment but about penalty. I have no probelm to reply the loan but why should I pay the penalty. Keep in mind that repayment in case property is sold is must so there should be no penalty for something which is must do.
On the other hand, repayment of full or part loan without selling the property is optional that a borrower may opt for or not. And then I can understand (though I still do not agree, but that is something else :-)) that banks charge penalty in this case.
deepak K Gujrati
(CA-practice)
(966 Points)
Replied 01 April 2009
You have righly understood. The repayment shall be made by the purchaser of the property. There is one issue which you have to understand. When purchaser pays any amount towards repayment of your loan ,he will not get any title of the property. Because your lendin bank may take some time say a week for releasing your security/title papers. This issue you should discuss in advance.
As I said Penalty is not compulsory. It depends on the agreement and existing policy of the lender institution.
P Gupta
(practice)
(75 Points)
Replied 01 April 2009
This is mere confirmation of what I wrote and is not same as what you wrote before.
Nonetheless, you mean to say that penalty on repayment of loan is negotiable. In theory every bank charges this penalty and the penalty clause can be found in bank documents.
Any comments from other gurus please.................................
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