Update Date : 26-Jan-2022

Created Date : 06-Dec-2021

Category : Home Loans

Wonders of SBI Maxgain

Having a house of our own, especially in a metro city is one of the most satisfying feelings that someone can ever experience. However, this happiness comes at a cost and series of sacrifices that many homebuyers make.

They not only let go of their life savings to create this asset but also part with their most precious possession like jewellery that they are so emotionally attached to. Some of them even look at it as something more than just an asset.

 

 PAIN AREA OF MOST BORROWERS

Having problems in life is not a problem at all but not being aware about the existing problems and the potential risks involve is concerning.

It is commonly observed that most of the home buyers these days are stressed and burdened with high EMI payments every month. Moreover, the major portion of it going into interest servicing doubles their burden as the principal portion hardly reduces.

This not only prolongs their journey of servicing their home loan EMI for years but in worst cases also leads to an extension of the original loan tenure, if the interest rate rises.

Specifically for some borrowers, the situation is so bad that they are hardly left with enough surplus to be able to make investments every month towards their future financial goals. Thus, inviting more trouble in years to come and taking more expensive loans ahead leading to a debt trap.

Borrowers at this point, seek instant solution where they can immediately start saving as much interest possible without taking a hit on their cash flow and boost principal repayment.

But unfortunately, all they have are the following 2 options.

  1. Either helplessly keep paying high-cost EMIs until the end of the tenure and suffer losses. OR
  2. Make pre-payments frequently to finish the loan sooner and save interest.

However, the question that comes up is, what if you are already living hand to mouth and do not have any surplus to make pre-payments.

Or let’s say you have some amount lying idle in your bank account however, it is meant for some other purposes or emergencies. Hence, you cannot use even that amount for making pre-payments because the moment you deposit the money in your home loan account, the liquidity is lost forever.

Or let’s say even if you can give it away, do you really think, in the uncertainties we are surrounded with nowadays, where your job is always at stake, it is a good idea to give away your life savings that you and your family can fall back on during financial crisis? Obviously NO!!!

Likewise, there are many more reasons due to which you need to be very careful and calculative while making pre-payments.

“SBI Maxgain” is one such home loan product that will not only swipe away all the limitations we have discussed above but also offers bundle of many more benefits that can help many borrowers bail themselves out of their worst nightmare.

Let us understand everything you need to know about it.

In this article, we will not just cover the working of the product but also guide you on how you can make the best use of it and make your life more secure and stress free.

 

WHAT IS “SBI MAXGAIN” AND HOW DOES IT WORK?

“SBI Maxgain” is a home loan product with an overdraft facility. It allows its users to temporarily park all the money they have in their bank’s savings or any other account (at low-interest rate) into their home loan account (at higher interest rate) and save interest.

The bank calculates interest on a daily basis. Hence, the borrowers have the flexibility to park money for any number of days and withdraw them as and when required.

The number of days the money remains in the account, the bank does not charge them any interest at all on that specific amount. This helps them save lacs of rupees which otherwise would have been lost to interest without impacting their cash flow.

It is one of the best and the most innovative developments in the home loan space. The borrowers do not have to spend a single rupee extra for paying off their loan faster and save interest. All they have to do is just park the money in the account till the time they don’t need it.

Imagine, every month without any financial loss, your loan balance starts reducing at a much faster rate on its own, without waiting for interest rates to change or having to make any prepayments at all.

Hence with maxgain, you can enjoy all the benefits of making pre-payments and comforts of not using that money for pre-payment at the same time.

 

Let us understand this with the help of an example

Scenario 1

In the above Scenario 1, Mr. Pal has taken a home loan of Rs. 50,00,000/- from a reputed bank @ 10.50% per annum for 20 years.

On realizing the amount of interest he is going to lose in 20 years i.e. Rs, 70,00,000/-, Mr. Pal decides to make part payment of Rs. 10,00,000/- that was lying idle in his savings account, so that he could minimize the loss.

However, at the time of giving away your life savings permanently, you tend to imagine yourself being into all possible problems and crisis that you are likely to run into.

Fearing this, he decides to hold on and pay a marginal portion from it i.e. Rs. 2,00,000/- only, while the remaining Rs. 8,00,000/- continues to remain in his low yield savings account where he is earning not more than 5% to 6% per annum.

Due to this, his loan balance reduces marginally to Rs. 48,00,000/- only and he fails to make a significant impact on his savings kitty and make the best use of his savings.

 

Scenario 2

In Scenario 2, Mr. Shah on the other hand, was exactly in a similar situation however, instead of a term loan, he opted for Maxgain.

While he looked confused, the bank manager assured him to put every drop of his savings into the loan account as he can withdraw all his money as and when required and the liquidity would remain intact.

Assured Mr. Shah transferred all his money i.e. Rs. 10,00,000/- into his Maxgain account. This reduced his loan balance significantly to Rs. 40,00,000/- leading to much higher savings than Mr Pal.

After a month, he plans a vacation with his family for which he needed money and withdrew the same Rs. 10,00,000/- which he had parked in his Maxgain account and sponsored the tour.

Until then, all the interest he had saved continues to remain in his account and save more interest due to its compounding benefit.

 

Let us try to understand it better with the help of the below illustration using another example.

The illustration is based on the assumption that you have borrowed Rs. 50,00,000/- from the State Bank of India @ 8% for 20 years.

TABLE 1

 

TABLE 2

In the above illustration, table 1 explains the working of a regular term loan, whereas table 2 shows the working of SBI Maxgain.

Term loan is the product that you currently have and your amortization would look somewhat like table 1.

If you notice, a column is added to table 2 where its user has deposited Rs. 1,00,000/- in his Maxgain account. With this, his home loan balance instantly got reduced, that is reflecting in the 2nd month and his savings meter has started.

The amount that you can see to the extreme right of the table 2 highlighted in yellow is the savings that its user is enjoying month on month. This is for temporarily parking the funds till the time he doesn’t need that.

The overall effect of the savings can be seen if you compare the principal balance in the 12th month of both the tables.

Think if 1 year can make this difference, how much difference will 20 years with compounding effect make.

 

WHAT ARE THE BENEFITS OF SBI MAXGAIN?

Why are borrowers rushing to switch to SBI Maxgain?

If used smartly, it can work wonders for you. Just by rolling your monthly salary in this account, you can cut short your 20 years home loan tenure easily by up to 6 to 8 months and save lacs of rupees in interest which can be used for repaying the principal. This amount you would have otherwise lost in your existing term loan.

The best part about the product is that, it does not just help you save money but also helps you protect yourself and your family in many difficult situations which may be far more important than money.

Let us understand some of the primary benefits it offers.

  • Save up to 100% interest without making pre-payments – Since SBI Maxgain does not require you to make pre-payments to save interest, you can park all your savings into this account and save lacs of rupees.
  •  

Currently, Maxgain account does not have any upper limit for depositing extra funds. You can deposit the amount as much as equal to your loan amount and save up to 100% interest.

 

  • Keep principal repayment high at all times – Like it does not have any upper limit, Maxgain currently does not have any lower limit either. Due to this, you can even roll their monthly salary in this account and manage your monthly household expenses from the same account.

 

This way, you can lower the loan balance, increase principal repayment and save every penny possible on a daily basis. Hence, in no way you are going to pay interest which is offered to you on paper, it is always going to be lower.

 

  • Earn maximum post-tax returns guaranteed with zero risk – Since returns earned out of the Maxgain account in not market-linked, it involves zero credit risk and minimum interest rate risk as well.

 

Borrowers earn interest equal to their home loan interest on any extra deposit that they maintain in the Maxgain account. So this makes it a very lucrative option to park funds for short as well as long term.

 

  • Cheapest pre-approval loan with maximum tenure – The interest being saved in the Maxgain account keeps accumulating can be withdrawn with principal deposit and put to any personal use at any point in time.

There are no restrictions on withdrawal too. This makes it as good as having a pre-approved personal loan with the lowest rate of interest and highest tenure possible including tax benefits which can be withdrawn instantly. Isn’t that great!!!

 

  • Monthly interest payout – The home loan interest being saved month on month is transferred to the Maxgain account at the end of each month. The borrowers can either withdraw it or let it remain in the account as it is.

 

If the money is not withdrawn, then it will further lower your loan balance and the savings will keep compounding on a monthly basis which will speed up your loan repayment at a much faster pace.

 

  • Put your monthly salary to work and earn interest out of it – Can you invest all your salary every month and make money out of it? The answer is NO until you have a Maxgain account.

 

Maxgain account has minimum restrictions pertaining to the number of withdrawals that one can make, the minimum number of days for which the money is required to be kept in the account or the minimum or the maximum amount of deposit.

 

Due to this flexibility, borrowers can transfer even their monthly salary into this account as and when they receive it, withdraw it as and when needed and make money out of it in the form of interest on a daily basis.

 

  • Protect your house from being foreclosed – This is one of the most useful benefits that a product can offer.

 

Timely payment of EMI is of utmost importance for all home loan borrowers. For any reason, if your home loan provider stops receiving EMI for 3 consecutive months, they start foreclosure proceedings to recover their dues by selling your property.

 

It is a common belief that having a backing of life insurance against a home loan will keep you protected against any unforeseen events at all times which is true to an extent but not completely. Very few borrowers think beyond the scope of insurance benefits to keep their family protected under any circumstances.

 

Insurance claim is subject to many conditions and processes. Due to this, there is a good chance that your insurance claim may get delayed due to a rigorous investigation process and disputes or in worst cases can also get rejected.

 

Some events like disability and job loss may fall beyond the scope of life insurance cover. And buying a cover to cover such events may be very expensive.

 

Hence, borrowers need to be prepared for anything and everything to help their family stay protected against all such risks at all times.

 

With Maxgain, they have an option to go for the maximum tenure possible, reduce EMI and transfer the maximum amount to the Maxgain account every month. After servicing the EMI, any excess funds lying in the account will not only keep their balance low and save interest but also enable them to use the deposit they have created for servicing EMIs during emergencies. This way, they can at least get sufficient time to work out alternate measures and not lose the house.

 

  • Dual benefit – Assuming, you received a bonus of Rs.1,00,000/- which you want to put to the best use. What would you prefer doing with the bonus? Invest it or make prepayments to save home loan interest?

 

What if we say that you can do both at the same time and make double returns out of the same bonus that you have got. Maxgain can help you do that.

 

Since Maxgain offers the flexibility to transfer all excess funds into your loan account with liquidity intact, you can transfer the entire bonus of Rs. 1,00,000/- into this account, get your balance reduced and start SIP from the Maxgain account to earn better returns.

 

This way, you will not just save interest on the remaining amount lying in your loan account but also create wealth for your long term goals.

 

  • Higher savings – Given a practical scenario, how often do you make pre-payments? May be once a year or once every 2 years? Can you do that every day? Or every month? The answer is NO.

 

Since money deposited in the Maxgain account is liquid at all times, borrowers need not plan the prepayment and can avail the maximum benefit by depositing all they have including their salary in that account and save interest every single day.

 

This way, you can start pre-payment right from day 1 of availing the loan.

 

For instance, a borrower has Rs. 5,00,000/- lying idle in his savings account. Assuming, that is all he has to fall back on in times of crisis, he would not be comfortable giving away all his savings to pre-payment and may only prepay 40% of what he has.

 

Due to this, he can now save interest only on his limited savings and the remaining 60% will continue to earn low returns in savings account or liquid funds.

 

Now, if he had a Maxgain account, he could have comfortably put all his money in the loan account and saved interest on the entire sum.

 

 

FOLLOWING ARE OTHER BENEFITS OF MAXGAIN

 

  • Monthly compounding benefit – Interest saved in the Maxgain account is paid to its users every month hence, it triggers compounding benefit on a monthly basis which leads to principal repayment at a much faster pace.

 

  • Can be used as a parking account to create SIPs – Instead of parking lumpsum amount in low yield liquid funds or savings account, borrowers can park them in the Maxgain account and start SIP from their loan account itself. Until then, they keep earning higher post-tax returns on their lumpsum deposit.

 

  • Operate account without restrictions – Maxgain account has minimum restrictions for the number of withdrawals that one can make, the minimum number of days for which the money is required to be kept in the account or the minimum or the maximum amount of deposit.

 

  • Interest saved is permanent – Interest saved in the Maxgain account is permanently given to its borrowers even if the deposits are withdrawn later. For example, if you deposit Rs. 1,00,000/- in your Maxgain account and withdraw it after 3 months, then the money saved in 3 months will be permanently given to its user and will not be reversed on withdrawal of the funds.

 

  • Quick withdrawal methods – Funds parked in the Maxgain account can be easily withdrawn without any hassle either using online banking or cheques.

 

Important note: It is important to note that, Maxgain benefit is not available for under construction properties.

It simply means, the extra funds deposited in the loan account cannot be withdrawn until the construction is completed and the original possession letter is handed over to the bank. Hence, the borrower must note this rule and avoid depositing any money that they require before the possession of the property.

 

WHY IS THE BANK FACILITATING SUCH AN ARRANGEMENT? HOW DOES MAXGAIN BENEFITS THEM?

Everyone reading this article would have one common question in mind. Why would a bank promote such a product which benefits only borrowers where their own interest income is hit and profits are lowered.

If you think that Maxgain is only going to benefit borrowers and not the bank then you are mistaken. In the last few years, Maxgain has significantly contributed to the bank’s growth and profitability and will continue to in the future as well.

Let us understand how

As we all know “State Bank of India” is the largest PSU having a huge base of more than 25 crores customers. Due to its wide customer base, the book size of their deposits is also huge. Loan advances are their assets which are always expected to be as strong as their deposits which are the bank’s liabilities.

 On the other hand, a weaker loan book displays inefficiency and puts tremendous pressure on the bank’s LDR i.e “Loan to deposit ratio”. This leaves banks with excess liquidity and warning signals to improve the size of their loan book to sustain in the long run.

Besides, they have to pay interest to the large group of their depositors. So where will the money come from? Obviously, by giving loans to others and earning higher interest from it.

Assuming, you have an existing home loan of Rs. 1,00,00,000/- with some other bank where you are helplessly paying a huge amount of interest month on month.

Now, if you transfer your entire home loan portfolio to SBI Maxgain, you straight away increase their loan book by as good as Rs. 1,00,00,000/-.

Now assuming, you have Rs. 1,00,000/- as idle funds that you have transferred from your savings account to your SBI loan account to save interest. With this, you are now at an advantage and able to save home loan interest on the entire Rs. 1,00,000/- but the bank is still charging you interest on the remaining Rs. 99,00,000/-. This helps bank increase their market share and profitability.

Secondly, it should be noted that the primary business of any bank is lending money to its borrowers and earning interest out of it. Apart from home loans, they offer many other products like personal loans, business loans, SME loans etc. which attracts a much higher rate of interest than home loans.

In order to smoothly carry out their lending activity, they need to continuously deploy various fundraising methods from the market which keeps their cost of funds high and efficiency low.

Instead, if there is anything the bank can do to reach out to its existing customers and encourage them to transfer all their deposits into their bank, it will not just help bank lower their cost of funds but also increase its efficiency and overall profitability.

So, they borrow funds from you at a home loan rate to offer expensive loans to other borrowers at a much higher rate.

This creates a win-win situation for both, the customer as well as the bank. Isn’t that a brilliant invention?

We hope, this article helped you understand everything about Maxgain and changed your outlook about the product.

 

FREQUENTLY ASKED QUESTIONS

  1. If I transfer my home loan to “SBI Maxgain”, will the tax benefits on my home loan remain?

Yes. “SBI Maxgain” is a home loan product and will continue to offer tax benefits that a regular home loan offers.

 

  1. How can I withdraw excess funds that I have transferred into my Maxgain account?

You can easily withdraw the excess money that you have parked in your Maxgain account without any hassle using the “SBI online banking” or “cheque book”.

 

  1. Are there any limitations or restrictions while operating the Maxgain account?

Maxgain account has minimum restrictions for the number of withdrawals that one can make, the minimum number of days for which the money is required to be kept in the account or the minimum or the maximum amount of deposit.

 

  1. What are the eligibility criteria to avail of SBI Maxgain?

The bank offers this product for the minimum loan amount of Rs. 20,00,000/- and a maximum of Rs. 3,00,00,000/-.

 

  1. Is there any renewal fee or a recurring cost to maintain this account?

No. SBI does not have any additional charges to maintain the Maxgain account. Once your loan is done, you can enjoy its benefits without any renewal charges.

 

  1. How can I track my savings?

You can track its performance and savings after the end of the month. You can check your statement and track the available balance in your Maxgain account using SBI online banking.

 

  1. Can I transfer my existing home loan to SBI Maxgain?

Yes. You can apply for a balance transfer of your existing home loan to SBI.

 

  1. How is the interest calculated? Can I park excess funds for a few days and still claim the benefit?

Yes. The interest in the Maxgain account is calculated on a daily reducing balance. Hence, funds parked for even a few days can help you save interest.

 

  1. Can I make it my primary account for managing day-to-day expenses and paying all my bills?

Yes. Since the Maxgain account offers online funds transfer facility and participates in payment gateways, you can transfer your monthly salary in this account and make it your primary account.

 

With this, we can conclude this article and we hope that our inputs have helped you gain valuable insights and enhanced your knowledge level on the subject matter.

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