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Wow! You Can Now Earn Interest Cashback on Your Home Loan

Moratorium Interest Cashback Home loan

The government has announced an interest cashback scheme for borrowers who availed of the moratorium, launched by the RBI for March 1 – August 31, 2020. Even those who did not take a moratorium will benefit from the cashback scheme. However, the benefit is restricted to borrowers having sanctioned and outstanding credit limits upto INR 2 Crore as on Feb 29, 2020. The list of eligible borrowers also includes the ones who are paying home loans. And, with the breakthrough announcement from the government, all eyes would be on how much a home loan borrower can save. We have calculations ready for you! Let’s check the same here. 

Application of Interest Cashback Benefits on Your Home Loan Repayments

Before heading to the calculation, it’s important to know how this interest cashback benefit will apply to your home loan repayment. Lenders will calculate the difference between compound interest and simple interest from March 1 – August 31, 2020, and credit the same to your home loan account. The calculation will be done at the rate of interest prevailing as on Feb 29, 2020, on monthly rests.

Calculation of Interest Cashback Benefits for Different Home Loan Amounts

As the average loan quantum of INR 20-60 lakh across the country, we can have calculations mostly across this loan bracket. Considering the current home loan market, we can segregate loan amounts into INR 20 lakh, INR 35 lakh, INR 50 Lakh, INR 60 Lakh and INR 1 Crore. The home loan interest rate depends much on the loan quantum. If we see the trend of home loan rate setting, the rate increases as the loan quantum rises. Let’s follow the trend and make calculations accordingly.

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As per the scenario that existed around Feb 29, 2020, the home loan rate would have been 8%, 8.20%, 8.50%, 8.70% and 8.85% for loan amounts of INR 20 Lakh, INR 35 Lakh, INR 50 Lakh, INR 60 Lakh and 1 Crore, respectively. Let’s check the cashback calculations for borrowers having such outstanding home loan balance on the said date.

Loan Quantum (In INR)Interest Rate (In Per Annum)Compound Interest (In INR)Simple Interest (In INR)Interest Cashback Benefits (In INR)
20,00,0008.00%81,345.2480,0001,345.24
35,00,0008.20%1,45,973.911,43,5002,473.91
50,00,0008.50%2,16,298.752,12,5003,798.75
60,00,0008.70%2,65,776.602,61,0004,776.6
1,00,00,0008.85%4,50,739.264,42,5008,239.26

When Can You Get the Credit from Lenders?

Lending institutions will need to credit the cashback into the accounts of borrowers latest by November 5, 2020.

 

The cashback scheme is subject to the loan account being standard and not a non-performing asset as on Feb 29, 2020.

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  • Home Loan Interest Rates December 2020
    Axis Bank7.75% - 8.55%
    Bank of Baroda6.85% - 8.25%
    Citibank7.13% - 8.03%
    HDFC6.90% - 7.65%
    ICICI Bank6.90% - 8.05%
    Indiabulls Housing Finance Limited8.99%
    Kotak Bank6.75% - 8.45%
    LIC Housing6.90% - 7.90%
    Piramal Capital & Housing Finance9.65%
    PNB Housing Finance7.50% - 9.20%
    Reliance Home Finance8.75% - 14.00%
    State Bank of India/SBI6.95% - 7.60%
    Tata Capital7.50% - 8.75%