Axis Bank has introduced an alternative for its new home loan customers in which the principal amount will be reduced on a monthly basis. As per the bank’s officials, the reduction in the principal amount borrowed, with every month’s repayment, will result in the decrease of interest outgo during the duration of a loan.
The private sector lender announced that the interest rate for the borrower has been kept at a higher level of 9.05-9.25% as against 8.85- 9.05% for the older product. Under the new product, the loans offered by the bank will range between Rs 3 lakhs and Rs 5 crores.
Rajiv Anand, Executive Director for retail banking told reporters, “The new home loan product will reduce the overall interest burden on the borrower. We are confident that this unique concept of ‘reducing monthly instalments’, along with big savings on the interest side, will be an attractive proposition for home buyers.”
In a statement released, Axis Bank used an example of an Rs 50-lakh home loan, stating that by the end of the 20th year, the interest outgo under the current equated monthly instalment (EMI) system, a borrower will be paying Rs 57.96 lakh in interest alone assuming an interest rate of 9%. But under the new offering, even assuming for a higher interest rate of 9.20%, the total interest outgo will be Rs 46.19 lakh only on the same amount of loan.