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2 mins Read | 1 Year Ago

Interest Benefit in Money Saver Explained

Interest Benefit in Money Saver Explained

 

Interest Benefit in Money Saver Explained

One of the benefits of investing in Money Saver is the saving of interest charged on the outstanding loan. In a standard Home Loan, the interest is calculated on the disbursed loan amount and there is no way to reduce the interest burden except by making part payment of the loan. However, this is not the case with Money Saver.

In Money Saver, the interest is calculated on a daily basis on the outstanding principal minus the surplus funds parked in the Overdraft (OD) Account. You can reduce your interest amount anytime by parking your bonus/excess savings/or any other surplus funds in the OD Account. The more funds you park, the lesser interest you pay on your loan amount. Moreover, unlike prepayments, where payment once made cannot be withdrawn, the funds parked in the Money Saver OD Account can be withdrawn anytime, anywhere, as per your convenience.

Let us understand the interest benefit of investing in Money Saver through an illustration:


Mr. Sharma availed a normal Home Loan of Rs 50 lakh at an interest rate of 9.0% for a tenure of 20 years. The EMI paid by Mr. Sharma was Rs 44,986.

Mr. Gupta availed the Money Saver Home Loan for the same amount (Rs 50 lakh), at the same interest rate (9.0%) and for the same tenure (20 years). Additionally, he deposited Rs 5 lakh in the Money Saver OD Account. The EMI paid by Mr. Gupta was Rs 41,236.

On comparing the case of Mr. Sharma and Mr. Gupta, by just depositing Rs 5 lakh in the OD Account, Mr. Gupta was able to reduce his monthly EMI by Rs 3,750, thus reducing the interest by Rs 45,000 per year. Over the loan tenure of 20 years, Mr. Gupta was able to save Rs 9 lakh on interest and had the flexibility to use Rs 5 lakh deposited in the OD Account.

Year

Interest on Home Loan

Interest on Money Saver

Yearly Savings on Interest through Money Saver

1

Rs 4,46,200

 Rs 4,01,200

 Rs 45,000

2

Rs 4,37,416

 Rs 3,92,416

 Rs 45,000

3

Rs 4,27,809

 Rs 3,82,809

 Rs 45,000

4

Rs 4,17,300

 Rs 3,72,300

 Rs 45,000

5

Rs 4,05,805

 Rs 3,60,805

 Rs 45,000

6

Rs 3,93,232

 Rs 3,48,232

 Rs 45,000

7

Rs 3,79,480

 Rs 3,34,480

 Rs 45,000

8

Rs 3,64,437

 Rs 3,19,437

 Rs 45,000

9

Rs 3,47,984

 Rs 3,02,984

 Rs 45,000

10

Rs 3,29,987

 Rs 2,84,987

 Rs 45,000

11

Rs 3,10,301

 Rs 2,65,301

 Rs 45,000

12

Rs 2,88,770

 Rs 2,43,770

 Rs 45,000

13

Rs 2,65,218

 Rs 2,20,218

 Rs 45,000

14

Rs 2,39,457

 Rs 1,94,457

 Rs 45,000

15

Rs 2,11,279

 Rs 1,66,279

 Rs 45,000

16

Rs 1,80,458

 Rs 1,35,458

 Rs 45,000

17

Rs 1,46,746

 Rs 1,01,746

 Rs 45,000

18

Rs 1,09,872

 Rs 64,872

 Rs 45,000

19

Rs 69,538

 Rs 24,538

 Rs 45,000

20

Rs 25,421

 Rs -19,579

Rs 45,000

Grand Total

Rs 57,96,711

 Rs 48,96,711

 Rs 9,00,000

The more funds you deposit in the OD Account, the more you save on interest and the savings on interest can be invested further to generate higher returns.

Transfer your loan to ICICI Bank Money Saver and enjoy the enhanced savings now.

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