Home Saver Loan Accounts – Save Interest With Home Loan Saver

Indian housing loan market is a tough and competitive segment. Lenders and banks are introducing innovative products and offers to lure prospective borrowers. One such attractive and is home Saver loan account.

Different banks and lending institutions offer it with different names and minor changes here and there. Some of the popular loan schemes under this category are as follows.

  • home saver loan accountSBI Maxgain Home Loan
  • Standard Chartered Homes Saver Loan
  • ICI Bank Money Saver Home Loan Account
  • HSBC Smart Home Loan Account
  • Citibank Home Credit Scheme
  • ICI Bank Money Saver Home Loan Account

Characteristic Feature Of Home Saver Loan Account

Whatever be the name, the basic stitch feature of a home Saver loan account is that, the bank allow you to open a savings / current account which is linked with your home loan account. The calculation of applicable interest is done on the difference of outstanding principal of home loan and the balance maintained in the linked account.

This means that your effective interest payment is reduced depending upon the money lying in your linked account. The bank will not be paying you interest on this money parked in the linked account, but you will effectively be getting interest equal to the applicable interest on your home loan, on this sparked a amount also.

As you must be aware, your EMI has two components – the interest component and the principal repayment component. The principal repayment component is effectively used to reduce your outstanding loan balance. Please bear in mind that a home Saver loan account does not effectively changes the EMI. The total EMI remains same, but the interest component gets reduced and the principal repayment component gets increased.

This way, your loan is repaid in a fast manner and your effective total interest burden is reduced considerably.

Disadvantage of Home Saver Loan Account

The flip side of home Saver loan account is that they usually charge a premium to provide you this facility. The applicable interest rate on a typical home saver loan account is about 0.5 to 1% higher than plain vanilla home loan account. This means that home Saver loan accounts are beneficial to a borrower only if they have sufficient funds lying un-utilised in their savings or current account is earning measly 3.5 to 4% interest rate.

Concluding Remarks

To summarize we can say that,

  1. They have a higher applicable interest rate – typically about 0.5 to 1% higher
  2. They are beneficial only if you have large funds lying un-utilised in saving or current accounts
  3. This un-utilised amount does not directly earn any interest. But effectively it earns good returns equal to the interest rate which is actually being paid by you to the lender on your home loan.
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Lots of approximations and assumptions have been made while developing the calculators.

Please make your own calculations before making any financial decision.