With interest saver loan account, no need of contingency fund

August 12, 2020 5:00 AM

The advantage with an interest saver account is you need not maintain a contingency fund elsewhere at a lower interest rate.

You will get the benefit on your outstanding loan for the remaining period of the loan.You will get the benefit on your outstanding loan for the remaining period of the loan.

By Chaitali Dutta

I took a home loan in November 2015 from IDBI, via an interest saver Current Loan account. I am charged interest for only the difference between my loan amount and my current account balance. My interest has been reduced to 8.15% now. Should I transfer my loan to another bank with a lower interest rate (7-7.15%) or should I continue with it as I try to maintain 10-15% of my loan amount in my current account?
—Rahul Lumb
I assume that the remaining period of the loan is about 15 years. My calculations say that your interest outgo for the remaining tenure will be similar if you maintain at least 15% of surplus funds in your interest saver loan account @ 8.15% v/s a term loan of full amount @7.15% with another provider. The advantage with an interest saver account is you need not maintain a contingency fund elsewhere at a lower interest rate. On the other hand, the new term loan will be linked to the repo rate, hence you will get the full advantage of reducing rates going forward. Consider a switch only after looking at the macro scenario.

I have already taken a home loan from SBI in 2018. Will I be eligible for the PMAY subsidy if I apply now?
—Pranab Naik
Yes, if the loan is sanctioned on or after January 2017, and you are other-wise eligible for PMAY subsidy, you may apply now. You will get the benefit on your outstanding loan for the remaining period of the loan.

I took a loan from a NBFC in 2017. Am I eligible for PMAY subsidy now?
—C P Manivannan
If your loan is eligible for PMAY under EWS, you can still apply for it. The subsidy will not be on original loan amount but on your current loan outstanding.

I have been working in Dubai since January and opened an NRI account in Canara Bank in March. Is it possible to apply for a home loan?
—Narayanan T
Yes, NRIs employed abroad are eligible for home loans for purchase of property in India. However, you need to have NRI status for minimum of three years and minimum employed abroad for two years. Check eligibility criteria at https://canarabank.com/User_page.aspx?menulevel=1&menuid=3&CatID=59. Enquire with Canara Bank to apply for home loan under resident scheme.

The writer is founder, AZUKE
Personal Finance Advisory (www.azukefinance.com).
Send your queries to fepersonalfinance@expressindia.com

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