ICICI Bank Ltd, the country’s largest private lender, has come up with a 1% cashback offer on every equated monthly instalment (EMI) you pay for the entire tenor of the home loan. Under this cashback offer, 1% of the EMI will be returned to the customer. The offer is available for floating and renewable fixed home rates.
What is it?
The cashback will start accruing from the first EMI month and will get credited into the customer’s account after the completion of the 36th EMI month. Subsequently, the 1% cashback will get accumulated every EMI month and will get credited into the customer’s account after every 12th EMI month. Customers can choose to avail the cashback either in the form of credit to their ICICI Bank account or in the form of adjustment against principal outstanding.
How does it work?
You will have to open a savings account with ICICI Bank and activate the auto debit facility for your home loan to the account to avail this offer. Once your EMI starts getting deducted from your ICICI account, every EMI will be taken into account for the cashback offer. For instance, if you take a Rs.25 lakh loan for 20 years, your total cost of loan will be Rs.59,02,580 (loan cost of Rs.58,90,080 plus processing fee of 0.50% of the loan amount). Your EMI outgo will be Rs.24,542. Through the cashback of 1% for the entire loan amount, you will save Rs.58,900. But if you take the processing fee attached to the home loan, your total savings would go down to Rs.46,400 over the tenor of the loan. Taking the earlier example, after 36 months, you will get a cashback of Rs.9,144. Now if you take the option of adjustment against principal outstanding, your tenor will go down by six to seven months.
Watch out for
If you miss paying an EMI during the first 36 months, you will be eligible for the cashback benefit for that particular period if you pay the overdue EMIs before the 36th month. For instance, if you miss the EMI in the 30th month and pay EMIs for the 30th and 31st months together in the 31st month, at the end of 36 months, you will get cash back. However, if you miss paying the EMIs in the last three months—34th, 35th and 36th months—you will not be eligible for the cashback offer for the entire period of 36 months even if you pay all the dues after say the 38th month. Similarly, during the 12-month cycles after the 36-month cycle ends, if you miss an EMI, you will not get the cashback offer for the preceding months, if you are unable to pay it before the stipulated period of 12 months. For instance, if you miss paying the EMI in the 11th and 12th month in a 12-month cycle, you will not get the cashback benefit for the preceding 10 months. The cashback computation will start after you pay all the dues.
Mint Money take
Among floating home loan rates currently available in the market, ICICI Bank’s rate is among the cheapest at 10.25%. However, make sure you are disciplined enough to make the EMI payments regularly; if you aren’t, the cashback benefit will reduce substantially.