Benefits Of Home Saver Loan | What Is Home Saver Loan & How It Works
Benefits Of Home Saver Loan
Now a day, there are many examples present of those people that purchase their residence by taking home loan. If you are one of them then we have something special for you as we are describing Benefits of Home Saver Loan, you can avail of this prospect because if you posses monthly savings, you are eligible to acquire bonus as arrears or some inheritance then you have a dilemma whether to prepay your home loan or set it aside for emergencies. So let’s talk about What is Home Saver Loan & How it Works?
With the help of this saver users can put additional balance in their account and they are applicable to withdraw their money in any misfortune or abrupt needs. Home Saver Loan is currently present at limited numbers of banks and each bank has its own brand name for such types of products. MoneySaver, HomeSaver, MaxGain etc are the well known home saver loan of SBI. It is also available on many banks some of them are Citibank, Standard Chartered Bank, HSBC, IDBI Bank, Union Bank and Bank of Baroda.
What Is Home Saver Loan?
It is such option that permits home loan borrowers to pay more from their surplus amount as well as lets them withdraw from the same pool if they necessitate it in case of emergency.
Here is option present in front of you if you are loan borrower then you are applicable to pay more when you have surplus fund and withdraw from the same fund in case of emergency situations. There is another option where loan borrowers are saved from further ignominy of running pillar to post to mange emergency operating expenses.
How It Works?
Although this concept is quite simple, but it is commanding. It works, in order to balance some part of the principal amount from your deposit you have made in current or saving account. Once the principal amount is balanced, your interest rate will go down.
It consents to the borrower to deposit excess part of his savings in a current account, which is linked to his home loan account. Calculating the interest factor, the bank subtracts the balance in the current account from the borrower’s principal amount. For this purpose the average monthly amount in the account is considered. Bank charges on drawback around 0.5-1% which is more than the rate on regular home loans.
How To Put additional Money In Home Saver Loan
- Currently the interest rate on saving account is near about 4 %. Transferring money from saving account to current account associated with home loan, will save you interest on your pending home loan that comes under range of 8-12%.
- Let’s discuss an example, if the customer has 10,000 Rs extra in his savings account. Then he would be earn approximately INR 33.3 @4% P.A. for 1 month and if he/she transfer then
- If you transfer this amount to your Home Saver account, then if interest rate is 10% you would then get 83.33 for 1 month as interest.
- The difference is 83.33 – 33.33 = 50 rupees per month. You can not technically receive this money because this interest on your home loan to bank for this particular month.
You can also understand this example with the help of the following table;
|Interest per annum (%)||4||10|
|Interest per day (%)||=4/(30*12)||0.011||0.02778|
|Amount in bank for 30 days||10,000||10,000|
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Comparison Between Regular Home Loan And Home Loan Saver
|Particulars||Regular Home Loan||Home Loan Saver|
|Average deposit in current account||–||5,00,000|
|Total interest paid||34,90,298||15,20,879|
|Actual repayment period||240||136|
|Tenure reduce (months)||–||104|
|Saving on interest||–||19,69,401|
The money present in the linked current account assists to the users to reduce his/her interest burden, while remaining easily accessible.
- The bank treat it’s as part payment and does not impose any prepayment penalty.
- This is more tax- competent as interest saved through such schemes is not taxable.
- Keeping any surplus in loan accounts is more beneficial than investing in fixed deposits.
- Customers are eligible to park this amount in the linked current account, obtain dual benefit.
- People can decide to avail of this product by depositing a recurring amount in your current account.
- They are more luxurious than regular home loans
- When you have money to put in linked account only then it is beneficial to you.
- If you invest your money in mutual funds you will get much higher returns than current account.
- The current account doesn’t produce any interest income
- All banks does not such provides kinds of offers.
- The only way to get such loans is to go to the bank.
- Various charges are involved before rushing to buy this scheme.
- The eligibility criteria also vary in various ways.
- Some banks requires at minimum annual income of Rs 1 lakh and at least two years.
Thus, the cash kept in the home loan account reduces the total interest on your home loan and support you to repay your loan faster. If you want to pay your all installment earlier you can take the avail of this tool.