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 Moreover, unlike prepayments, where payment once made cannot be withdrawn, the funds parked in the Money Saver OD Account can be withdrawn anytime, anywhere, as per your convenience.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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