The private sector banking entity in a bid to help borrowers reduce their overall interest outgo and thus lessen overall cost on home loan product can consider this option of new home loan scheme by the bank referred as 'Quick Pay'. But here is a catch which you cannot ignore:
Here in we will narrate the breakdown on the scheme, for you to then choose the best home loan scheme for you:
In a usual case for any loan type, you are required to pay EMI or equated monthly instalments and herein while the interest component is reduced with passing time, principal component is increased to maintain the EMI as same all through the term of the loan.
How Axis Bank's 'Quick Pay' scheme works?
But, unlike usual schemes, with a higher rate of interest i.e. 20-40 basis points higher at between 9.05-9.25% in case of salaried individuals, in Quick Pay the interest component goes down with time and the principal remains the same, so the EMI also changes as the interest goes down on a month on month basis.
Illustration: Under a quick loan scheme, supposing you take a home loan of Rs. 50 lakh or 20 year tenure, then your total outgo including the principal and interest even at a higher rate will come at around Rs. 96.19 lakh which is less than outgo in case of a usual scheme of Rs. 1.08 crore. So, this way home borrowers can take advantage of the scheme.
Remember, in this scheme, amount that can be secured as loan ranges between Rs. 3 lakh and Rs. 5 crore.
So, lesser interest means savings for customer and that too a substantial amount.
But the catch under the scheme is that borrowers at the initial years of the home loan tenure will be required to pay a higher amount. And not everyone will be in the capacity to pay a higher sum against loan servicing. So, herein you need to evaluate your cash flow situation and whether or not you will be able to service the debt in a way committed way.
Quick Pay's cost comes same as a pre-payment option that most banks offer
|Particular||Axis Bank's QuickPay Home||Regular home loan||***Regular home loan with pre-payment|
|Home loan||Rs. 50,00,000||50,00,000||50,00,000|
*** In the pre-payment option we assume pre-payment of Rs. 1 lakh for 5 continuous years which reduce interest component.
Quick Pay vs Regular home loan scheme: First and foremost you need to know that the quick pay loan option is floating rate option that simply means change in interest rate for you as a borrower. And it will be wise for you to opt for the scheme only when you can service higher payments at the initial years and also wish to continue the home loan terms as though i.e. do not foresee pre-payments from your end to foreclose the home loan account with the bank any time earlier.
But those of customers, who already have managed to pay the down payment via their hard-earned savings need to look for regular home loan option instead which offers a chance to pre-pay earlier and reduce overall interest outgo. But before pre-paying , you need to for sure look for the foreclosure charges as should not be negative for you.