Need Help Deciding: SBI Regular vs MaxGain Home Loan

[dreamer007]

Hey everyone,

I’m in the process of finalising my home loan and could really use some advice from those who’ve been through this recently.

I earn around ₹2.5 L per month (salaried), and I’m buying a property where the builder has tie-ups with SBI, HDFC, and Axis Bank. Out of these, SBI is offering the best rate and seems to be the most convenient option.

Now here’s where my confusion starts

The SBI representative offered me a 7.8% rate for the MaxGain OD account, but I’m not sure I fully understand the whole “OD” thing. From what I gathered, MaxGain lets you park your extra money in a linked account, and the parked amount helps reduce your loan interest since it’s treated like a temporary prepayment.

But then, I started thinking… if I actually have that extra money, wouldn’t it make more sense to just invest it in something like an arbitrage fund or mutual fund that gives 8–9% returns instead of just saving a bit of interest?

Also, I’m only 24 right now, and I already have my emergency fund and a separate term insurance policy in place.

With the new RBI rule that allows prepayment without any penalty, I’m leaning toward just going for the regular home loan at 7.6% — the cheaper one — and then prepay whenever I get bonuses or savings in the future. That feels simpler and more straightforward to me.

Still, the SBI guy is really pushing me toward MaxGain, saying it’s “better in the long run.” I don’t fully get why — maybe I’m missing something here? If anyone has real experience with MaxGain, please help me understand what actual advantage it offers in today’s situation where prepayment is already free.

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Also, one more thing — about loan insurance​

The bank rep said insurance is mandatory when taking the SBI loan.
But I already have a term insurance policy covering me much beyond the loan amount.
So, does SBI still force you to take their insurance plan, or can I skip it since I already have my own cover?

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Would love to hear what others chose
Did you go with Regular or MaxGain, and why?
And what’s the truth about this “mandatory insurance” thing?


Thanks in advance to everyone who replies
I’m sure many others in their 20s dealing with their first home loan will benefit from this discussion too.


— Sid

 

[anuragmukherjee28]

Great that you’re thinking this through so carefully, most people just sign whatever the bank says without understanding the details. Here’s the simple breakdown

MaxGain vs Regular Home Loan
You’ve understood MaxGain quite well already. It’s basically a home loan + overdraft account combo.

• Whatever extra money you park there is treated as if you’ve prepaid that much of your loan: meaning, you save interest on that portion.
• But the key difference is flexibility, you can withdraw that money anytime.

So if you’re someone who:

• Keeps a decent cash buffer (say ₹2–5L or more) regularly, or
• Gets irregular inflows (bonuses, freelance, gifts etc.), or
• Plans to park large amounts temporarily (till you decide on investments),

then MaxGain makes sense. It’s like a parking bay for idle funds that still work for you. But if you generally invest every rupee or don’t keep large cash lying around, the regular loan at a slightly lower rate is simpler and cheaper.

Your logic about investing in funds that yield 8–9% is valid, but remember, that’s not guaranteed and comes with some tax + risk. The 7.8% “saving” in MaxGain is effectively risk-free and liquid. So it depends on your comfort with market risk vs liquidity.

About prepayment
You’re right — with RBI’s no-penalty rule, you can prepay freely anyway. That’s why many people now prefer the regular loan unless they value the liquidity that MaxGain provides.

The “mandatory” insurance pitch
This one’s a classic trick. SBI (and most banks) cannot force you to take their loan insurance policy. RBI has made it clear, you can choose your own insurer or even skip it entirely if you already have adequate term cover.
Just be firm and say, “I already have a term plan covering this loan, so I’ll opt out of additional loan insurance.” They’ll still push, but they can’t legally deny your loan for that reason.

In short:

• If you expect to keep decent surplus cash lying idle → MaxGain is useful.
• If not, go with the regular 7.6% and prepay when you can.
• And no, the insurance is not mandatory if you already have a term plan.

You’re only 24, so keeping things simple and flexible is actually the smartest approach. Curious, do you expect to hold much idle cash after your down payment and interiors? That might tilt the answer one way or another.

 

[dreamer007]

Thankyou @anuragmukherjee28 for the amazing breakdown. I could see the conviction in your words.

I actually paid a down payment of 25 Lacs to the builder and asked the bank to max out the loan amount so I could get some free cash for the furniture and other needs.

I talked to the SBI guy and he proposed me the regular plan rate of 7.8%, my current CIBIL score is 777. Do you think this is the best rate I can get at the moment, or should I knock the doors of other banks too?

Thanks,
Sid

 

[anuragmukherjee28]

Hey Sid, 7.8% from SBI isn’t bad at all with your CIBIL score, but it’s always smart to check what others are offering before you lock in. Sometimes HDFC or Axis might quote 0.1–0.2% lower depending on your profile or if you have a salary account with them.

Just a small suggestion, avoid giving full loan applications everywhere, because each hard enquiry hits your CIBIL score slightly. Instead, ask for a soft quote or in-principle offer first. Most banks will share indicative rates based on your CIBIL range without a formal pull.

Since you’ve already made a big down payment and have a stable income, you’re in a strong position to negotiate, even with SBI. Just tell them you’re comparing rates; they often match the lowest offer to keep the customer.

If the difference is small, stick with SBI for convenience. But if another bank offers a visibly better rate with similar terms, it’s worth considering.