SBI Flexi Pay Loan Review

SBI Flexi Pay is a home loan scheme that let’s you to take a loan 20% higher than your eligibility. In this article, we review the various aspects of Flexi Pay so that new loan borrowers can make an informed decision. Imagine this. You’re in the middle of a long session of house hunting on a hot, summer afternoon. After looking at ten unimpressive apartments, you suddenly find yourself standing in the perfect home. You love the location, the layout is perfect and it’s airy and spacious. There’s just one problem: The price is a little higher than your budget. Not very high, but a few lakhs higher than your home loan eligibility. You don’t have enough savings to cover the gap between the cost and the loan amount and you begin to wonder:

How do I get a home loan higher than my loan eligibility?

Answer: Take an SBI Flexi Pay home loan. State Bank of India has a home loan scheme called Flexi Pay, through which you can take a home loan amount which is 20% higher than your loan eligibility. Not strong at maths? Let’s take an example: Say your loan eligibility is calculated at Rs. 40Lc. Naturally, if you apply for a home loan you will get a maximum of Rs. 40Lc. But if you opt for Flexi Pay, you can take 20% higher than Rs. 40Lc i.e. Rs. 48Lc. This extra 8Lc can help you get that perfect home you were daydreaming about earlier. Curious about how it works? Let look at the different conditions of Flexi Pay and understand what they mean:

Breakdown of SBI Flexi Pay home loan

• Flexi Pay home loan is only available to borrowers who are:

1.       Between 21-45 years of age
2.       Salaried Professionals
3.       Have 2+ years of work experience

• Flexi Pay Loan amount is 20% higher than your home loan eligibility
• Interest Rate is same as the normal SBI Home Loan: 9.45% for Men & 9.40% for Women. If interest rate increases, then the EMI will also increase along with it. Pretty normal so far.
• There is a ‘Moratorium Period’. Ummm. This is a little complicated so let’s break it down. Moratorium means ‘temporary delay’. Basically, you delay paying back your loan. During this period, you pay a lower EMI which repays the interest but not the principal. You can choose a moratorium period of 3,4 or 5 years. Tip: Principal Amount remains unchanged at the end of the moratorium period.

• EMI increases with time: In Flexi Pay, the EMI doesn’t remain constant throughout the loan tenure. These EMIs are called ‘Moderated EMIs’. There are 4 Moderated EMI amounts that you will need to pay through the loan tenure:

Ready?  That’s a bit heavy to grasp in one go, isn’t it? Why not read the whole thing a couple of times before you move on. If you need more help, we have written an article to help you understand the terms better.  Once you are clear about the basics of FlexiPay, it’ll be much easier to understand the rest.

Should you take the Flexi Pay loan?

The answer isn’t a simple yes or no. Flexi Pay is designed to help a specific type of borrowers, so you will need to figure out your own needs and make a decision based on that. Some of you may find that Flexi Pay is the answer to your problems while others might feel safer taking a new home loan under the normal terms & conditions. In our opinion,

You should take Flexi Pay if:

1. Early stage in career: At the start of your career, it might be good to choose this option. As your income increases, it’ll be easier to pay of the Moderated EMIs. You also benefit from the low EMI during the moratorium period because when you buy the house, your monthly salary might not be enough to pay a large EMI.
2. Guaranteed Salary Bumps: If you are confident that you have job stability and your income is going to increase sufficiently to cover the moderated EMIs of the future, Flexi Pay can be a good option for you.

You should not take Flexi Pay if:

1. Income not guaranteed to increase: If you aren’t sure that your income will increase in the future, then stay away from Flexi Pay! Why? Because the EMI will increase and your income may not. If you take the loan today and 8 years later you’re unable to pay the EMIs, your monthly expenses will be a disaster. If you start delaying your EMI repayments, your credit score will start declining. Not even considering the tremendous stress you will be in, if you fail to repay the EMIs regularly, you may even lose your house. It really isn’t a worthy risk.

The SwitchMe Verdict:

SBI Flexi Pay is a good scheme but it is risky.   After studying the details, we feel that Flexi Pay is a good option, but only for a certain group of people. Our Advice? TAKE THIS LOAN ONLY IF YOU NEED IT. You might find that you qualify for this loan and be tempted to buy a more expensive house than you were previously considering. But is it really worth it? SBI is basically taking a gamble that your income will increase 10% annually and you’ll easily pay off the loan. If that happens, great! You’ll own a bigger house earlier in your life. But the service industry is slowing down and right now, there is an annual income growth of 6-10%. If you are an outperformer and your company is giving you steady salary bumps, then you can take the risk. If you don’t desperately need a higher home loan, consider taking a normal home loan. As the EMIs of a normal home loan changes only if there interest rate changes, you can plan out your future expenses with some certainty. In Flexi Pay, it isn’t easy to plan your income, expenses and moderated EMIs 15-20 years into the future. So why not play it safe and sleep soundly at night? Well! That wraps up the review! When SBI Flexi Pay was launched, there were many people who started blindly recommending it to new loan borrowers. And while it does offer some great benefits to the borrowers, the system of moderated EMIs, moratorium period and 20% extra loan amount can end up confusing most first time home loan borrowers. This was why we decided to a review and give our opinion to clear up some misunderstandings and help you make an informed decision. Do let us know if you have any more questions regarding Flexi Pay or home loans in general. If you feel that we didn’t address some topic that you wanted to know more about, ping us at hello@switchme.in and we will consider it for our next blog post.