Loan Repayment

POSTED BY Gaurav Kumar ON January 17, 2013 9:54 pm COMMENTS (10)

I took a home loan of 1655000/- that needs to be repaid in 240 installments with a moratorium period of 18 months . The loan sanction letter given to me clearly states that after the moratorium period my EMI would be Rs. 16657/-. However, they are deducting the EMI of Rs. 19393/- now for the period of 222 months with the current rate of interest of 10.75 %. As per my calculation, my monthly EMI should be 17201/- for the duration of 222 months with the current rate of interest of 10.75 %.

Even if you calculate the EMI for the duration of 240 months with the current rate of interest of 10.75 % it will come as 16802/-. I fail to understand how the monthly EMI has been calculated as Rs. 19393/- . Can anybody explain? During the moratorium period of 18 months I was regularly paying the interest amount.

10 replies on this article “Loan Repayment”

  1. Dear Gaurav, due to higher EMI, more amount is going into principal adjustment & accordingly months after months, the interest is coming down at a faster pace. So over all part of principal in your EMI ‘ll also increase on mly basis.

    In alll, this translates into early closure of your home loan. A rough calculation indicates loan closure in 180-185 months. That’s a good benefit in itself to keep same EMI of 19K.

    Thanks

    Ashal

  2. Gaurav Kumar says:

    Is it because I will be paying less interest as the loan will be repaid earlier than 222 months?

  3. Dear Gaurav, in case you want to go for older EMI of 16K, you may request so. Although in my personal choice, I w’d like to keep the same EMI of 19K if your cashflow permits.

    Thanks

    Ashal

  4. Gaurav Kumar says:

    I got the following response from SBI. They are saying : “as you have paid more amount during this period (moratorium) so your interest was being paid fully every month and part amount of your principal has also been paid” Does it make any sense? because I never paid extra during moratorium but the same has been deducted by them as I opted for ECS. Also, why they have decided by themselves about decreasing the loan repayment period without my consent or without even informing me.

    dear sir

    If you take moratarium period of 18 months that means you don’t pay principal during this period your outstnding amount will increase. and EMI also increases after that period. But as you have paid more amount during this period so your interest was being paid fully every month and part amount of your principal has also been paid .So if you are paying your EMI of 19393/- your principal is also decresing accordingly and your loan may close early. You can take statement of account from your branch SECTOR 62 NOIDA . WE have also send your request to that branch for statement of account.

    Regards

    AGM , SBI ,RACPC NOIDA

  5. Dear FFC, in case of interest accrued only, the EMI is not coming 19393, as loan ‘ll not be repaid in 222 months. Interstingly, dear Nitin was paying the interest so the question of accrual of interest does not arise. Also the 1530179, figure indicates that the benefit of higher principal repayment is coming in this set up.

    thanks

    Ashal

    1. Dear Ashal, I get that. Its just that I am curious that I am not able to reproduce the banks emi. I think if this kind of goofup happens a customer should go to consumer court and claim compensation.

      In this case Gaurav entered the loan agreement with understanding that emi is 16657 (which is correct math wise) and now it is 19393! This is weird to say the least.

  6. Dear Gaurav, I think SBI started wrong EMI deduction from you but as the EMI is higher than the one should be charged, extra amount is getting adjusted towards principal & that’s why, your loan is coming down at a higher pace.

    So in effect, 18+163 = 181 months in total ‘ll be your loan closure time.

    Please cross check it with SBI.

    Thanks

    Ashal

  7. Gaurav Kumar says:

    Thank you Ashal for your response. I checked with SBI and the current ROI is 10.75 % (It is showing on their website as well). I asked them for an explanation and I got the following response that I am unable to understand :

    DEAR SIR

    WITH REF TO YOUR LETTER DTD 17.01.2013 WE INFORM THAT YOUR LOAN HAS BEEN OPENED FOR 240 MONTHS WITH 18 MONTHS MORATORIUM PERIOD YOUR EMI COMES RS. 19393/- . DURING MORATORIUM PERIOD OF 18 MONTHS YOU COULD PAY ONLY INTERST AMOUNT AND NOW YOUR EMI OF RS. 19393/-HAS BEEN STARTED .BUT IN THE ARRANGEMENT LETTER THEY HAVE GIVEN THE AMOUNT OF RS. 16657/-FOR THE LOAN TENURE OF 222 MONTHS NOT 240 MONTHS.aS YOU WERE PAYING DURING MORATORIUM PERIOD SO NOW YOU LOAN OUTSTNDING IS RS. 1530179/- AS ON DATE.

    REGARDS

    ASST GEN MANAGER

    1. This letter makes no sense! Ask them for schedule. Only the calculations you made makes sense to me.

      You get an EMI of 19393 for 10.877% 222 months and 18 months amortization with no interest paid but accrued during amortization!

  8. Dear Gaurav, had you checked with SBI for this higher EMI? Please ask your branch manager to provide you the loan amortization schedule. If your ROI is around 12.75 or 13%, then this EMI may be right. So please do check your current applicable ROI also.

    thanks

    Ashal

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