Axis Bank has launched a new home loan repayment product called QuickPay which helps you reduce your interest cost, reported Moneycontrol. Sounds nice, right? But it may not suit everyone as you have to pay higher installments in the initial years.
Every EMI has two components; the principal and the interest. In Quickpay, the principal component remains the same but the interest component goes down every month.
Under this scheme, one can borrow a minimum of Rs 3 lakh and a maximum of Rs 5 crore.
The interest rate for salaried persons is between 9.05-9.25 percent and it varies as per the borrower’s profile. The interest rate is 20-40 basis points (bps) higher than that of a regular home loan, which is 8.85-9.05 percent at Axis bank.
One basis point is a hundredth of a percentage point.
The interest outgo for the tenure of the loan decreases if you opt for a QuickPay loan.
If you take a home loan of Rs 50 lakh for 20 years at an interest rate of 9.2 percent, then with QuickPay, your total repayment amount (the sum that you will pay to the bank as principal repayment and interest) comes to Rs 96.19 lakh. For Axis Bank home loan (EMI system), you end up paying Rs 1.08 crore. The interest outgo in QuickPay system comes to Rs 46.19 lakh, whereas, for the traditional loan the interest outgo comes to Rs 57.96 lakh.
For QuickPay loans, your total interest outgo and the amount you end up paying back to the bank is lower, but there is a cost involved. Your outgo in the initial years will be higher than in the EMI-based system.
Many banks also offer you the option of prepayment of housing loans that have almost the same effect as QuickPay.