HSBC India offers a pay bank loan scheme launched for its new home loan borrowers. The scheme offers to pay back 50 per cent of the interest paid, on the 12th, 24th and 36th equated monthly instalments (EMIs). The bank said that the offer was to reward their loyal home loan customers. At an interest rate of 10.75, the cumulative refund over three years works out to Rs. 1, 26, 529, for a loan of Rs. 1-crore loan.
The home loans are structured in such a way that higher interest payments will be made in the early years and higher principal payments in the later therefore there is no denying the savings on interest. Currently HSBC offers home loans at a rate of 10.75 per cent for loans above Rs 75 lakh which is lesser than the rate of SBI but this advantage may be abolished following the next round of rate rise.
Within the first six months of the loan the rise in rate would be 11.25 per cent. According to the conditions that apply, delay in even a single EMI would translate into no further repayments from the bank. Home loan consultants have suggested that the savings from the interest payment can be used to repay the loan through part-prepayment.