Useful thing: If you also want to take a home loan, then understand the math of saving interest from interest savings account.
The Reserve Bank has increased the repo rate by 0.90 percent within a month and now all government and private banks are increasing the interest rates on their loans. Naturally your EMI burden is also increasing, but if you want to avoid rising interest rates, you can avail interest savings accounts.
Although this facility is not available in all banks, many large banks offer these accounts under different names. ICICI Bank offers it as Money Saver Home Loan while SBI offers it as Maxgain. Similarly, Standard Chartered Bank opens this account in the name of Home Saver. It is also being called smart loan.
This is a double benefit
In this type of plan, your home loan account is linked to the current account. You can keep your surplus funds in this account, in return of which the bank offers a lower interest rate on your home loan. The bank charges interest on the home loan based on your surplus fund, which is calculated on a daily basis.
This is how profit is calculated
Suppose you have taken a home loan of Rs 40 lakhs and there is a surplus of Rs 10 lakhs in interest savings account, the bank will calculate the interest on your home loan only on Rs 30 lakhs. The bank will adjust the tenure of your loan without changing the EMI. The higher the surplus in your account, the lower will be your loan EMI.
You can withdraw money from surplus account
This plan also has the facility that you can withdraw money from your surplus account. Banks call this overdraft facility. However, it is important to note that the bank may increase the interest rate on your home loan if you avail this facility. However, despite this, it is better to keep your surplus funds in an interest savings account than in a liquid fund or other account, so that in return you get less interest on your home loan.
0.50% more expensive than normal home loan
Before opting for this type of loan, it is important to know that the interest rate on this type of home loan ranges from 0.50% to 0.60%. This is because your effective interest rate is charged on the amount remaining after the addition.
If you want to withdraw money from your surplus account, then keep in mind that use it only for those needs for which you have to pay more interest on the loan from the bank. For example, if you want to take an education loan for your child’s education, it would be better to use the money from your spare money instead of taking money from the bank. In such a situation, you will have to pay less interest on your home loan than the interest on education loan.