Should you go in for a Home Saver loan?

This is with reference to the home loan products from ICICI Bank (Money Saver), HSBC (Smart Loan) and Stanchart (Home Saver).

I was told by a home loan agent that there have been several disputes with existing customers on the computation and calculations during the period of the loan.

Have you heard of complaints on this front?

Is this safe to embark on this loan?

If yes, what are the factors I need to consider?

- Anant

I haven't heard of any disputes in interest calculations where these loans are concerned.

However, I must say this. The calculation of interest in these kinds of loans are fairly tedious. As a result, it may not be immediately intelligible to a lay consumer.

The banks, on their part, have not really made any serious attempt to simplify or explain these calculations to their customers.

In such cases, your home loan balance is linked to a current account in your bank. As per my knowledge, there is no interest paid on the amount kept in a current account.

The interest you pay on your home loan is calculated on the principal amount. This would be the principal outstanding minus the amount that you have in your bank account. This is calculated every month, over and above the Equated Monthly Installment.

So if you pay an excess amount over the EMI, the excess amount will remain available for use; at the same time, it reduces the amount of interest you have to pay. The interest is calculated by deducting the available current balance amount from the principal outstanding amount.

It is indeed a good scheme as long as you keep sufficient money in the linked current account.

These loans are typically 0.50% more expensive than comparable loans of equivalent tenure and amount. However, they make sense if and only if, on an average, you have surplus cash equivalent to more than 10% of the loan amount lying in the linked current account.

To see the other queries answered by our home loan expert, read Can I repay my brother's loan? and Why a home loan makes sense.

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