Isn’t it would have been wonderful if there was a way to reduce interest amount on the home loan which you have taken already?

Well, our banking system does provide a way through which you will be able to pay less interest amount than before.

Here is everything which you should know about the home saver account. 

What is the Home Saver Account?

Home saver loan account is an account where you can put your surplus cash that can be used to reduce your liability. In this, a current account will be linked to your home loan account.  

Each bank has different names for their home saver account. Following are some of the other names of Home Saver Account.

• MoneySaver Account
• MaxGain Account
• Smart Home Account
• Home Loan Interest Saver Account
• Home Credit Account
• Home Loan Advantage Account
• Smart Save Account

What is Home Saver Loan?

Home Saver Loan is a type of loan which helps you to save interest. In this, if you deposit extra cash in your current account than that amount gets minus from your principal outstanding loan amount for calculating interest.

Hence you will be charged less interest than before. And one more added advantage of this account is that you will be able to withdraw the extra cash whenever you want.

Why take the loan in Home Saver account?

By opting for a Home Saver account, you are able to pay less interest, save tax, and clear your debt faster. 

We will see all these three benefits later on. First, let us see how home saver loan works.

How does Home Saver Loan work?

Let’s see an example,

Loan Amount: ₹ 30,00,000

Interest rate: 8%

Tenure: 20 years.

Thus, you will have to pay ₹ 25,093 EMI. 

Now, due to Home Saver Loan, you deposit your extra surplus cash amount of ₹ 500000 in the account. 

So the interest will be charged on ₹ 30,00,000-5,00,000.

Now, the total outstanding principal amount will be ₹ 25,00,000.

Hence you will now have to pay Just ₹ 20,911 EMI. You save ₹ 4,182 per month.

If you don’t withdraw the extra ₹ 5,00,000 for at least 1 year, then you will be able to save ₹ 50,184 for a year.

And also you will be able to clear your debt before the stated tenure. Hence you will be saving a lot. Because if you didn’t withdraw the amount and kept it like that only, then you would have been able to clear your debt within 16 years approximately.

For whom is the Home Saver Loan suitable?

Home Saver loan is suitable for those who have a flow of extra income now and then. It is suitable for families having more than one salaried member.

It is also suitable for a businessman who has a surplus flow of income throughout the year. 

What are the benefits of Home Saver loan?

Interest Saver Account

Above example has proved how you will be able to save interest on your loan amount. 

Tax Benefit

Such schemes are free from tax. It is better to clear your loan liability by putting the surplus cash in your current account rather than investing in Fixed deposit account.

The income generated on FDs is taxable and you will also receive fewer returns on it. So to make good utilization of your extra money, you should keep it in a home saver loan scheme.

Clearing the loan liability before time

Due to the prepayment of the interest amount, you will be able to repay the loan amount before the stated duration. This will help you to clear your debt quickly. Also, such schemes don’t have prepayment charges.

Home saver account offers the flexibility of withdrawing the amount anytime

You can remove the extra money whenever you want. So if you require the money urgently or for any other purpose then you can withdraw it very easily.

What are the disadvantages of MoneySaver Account

Home saver loans are expensive than regular loans

Home saver loans interest rate can be 0.5 to 1% higher than the regular loans.

Extra money doesn’t generate interest revenue

The money in your current account is not used for generating income revenue. It is used to pay interest on the loan you have taken. The extra surplus if put in SIP, then you can earn a good income on it.

Not all banks offer Home Saver Loan

There are only a few banks that offer such a facility. Also, different banks have different eligibility criteria to qualify for the home saver loan scheme.

What is the surplus amount?

The most important thing required to have a Home Saver account is a surplus fund.

The surplus fund is the money that is left after all your compulsory expenditure is meet.

Conclusion

It can be concluded that the Home Saver Loan is beneficial if one has extra cash. However, it is better to take some advice from experts before making a decision. LoansXpert will help you in taking the right decision regarding home saver scheme.