In response to the government's calls to increase domestic demand and improve people's standards of living, the Industrial Bank is releasing two brand-new kinds of retail loan service on a nationwide basis - EZ Pay and Bi-weekly Pay. With an aim to improve the way that the bank serves the public, these new products will give personal borrowers more flexibility in the way that they choose to repay their loans. This means that borrowers will face less pressure from loan repayments and will realize their estate dream with ease.
About EZ Pay
“EZ Pay” is a brand-new loan repayment mode that the Industrial Bank is launching for medium and long-term personal housing loan borrowers and personal commercial property loan borrowers. For a certain period of time, eligible borrowers are only required to pay back the interest on their loans (up to three years). Once the agreed period elapses, borrowers will be required to repay both the principal and interest thereafter.
★ Features
• Helps borrowers to manage their capital as the loan repayment mode matches personal income growth.
• Eases the pressure of repayment at certain periods and mitigates capital shortage.
• Save on interest-enjoy interest rates 30% below the benchmark interest rate for loans that meet certain conditions.
• The service is available for both new and previous clients.
• Easy to apply for.
★ A comparison between EZ Pay and regular CAM (constant amortization mortgage) repayment method
EZ Pay V.S. CAM (Constant Amortization Mortgage Loan) | ||||||
RMB 1 million loan; 30 years; 30% below benchmark interest rate. i.e. (4.158% for loans over 5 years) | ||||||
Unit: RMB Yuan | ||||||
Installment | EZ Pay | CAM method | ||||
Principal | Interest | Total | Principal | Interest | Total | |
1 | 0 | 3,465.00 | 3,465.00 | 2,777.78 | 3,465.00 | 6,242.78 |
2 | 0 | 3,465.00 | 3,465.00 | 2,777.78 | 3,455.38 | 6,233.15 |
… | … | … | … | … | … | … |
36 | 0 | 3,465.00 | 3,465.00 | 2,777.78 | 3,128.13 | 5,905.90 |
37 | 3,086.42 | 3,465.00 | 6,551.42 | 2,777.78 | 3,118.50 | 5,896.28 |
38 | 3,086.42 | 3,454.31 | 6,540.73 | 2,777.78 | 3,108.88 | 5,886.65 |
… | … | … | … | … | … | … |
Suppose that a mortgage loan of RMB 1 million is to be repaid in 30 years at an interest rate 30% below the benchmark rate (i.e. 4.158%, which is assumed to be constant) (same hereinafter):
According to the CAM method, the borrower is required to repay principal of 2,777.78 Yuan and interest of 3,465.00 Yuan in the first month, which is a total of 6,242.78 Yuan. The total principal and interest to be paid in the second month is 6,233.15 Yuan. Following this, monthly installments decrease by 9.63 Yuan every month.
According to EZ Pay, the borrower may apply to repay interest alone in the first three years and then offer repayments according to the CAM method from the fourth year onwards. This way, the borrower is not required to pay the principal back for the first three years, but is required to offer interest payments of 3,465.00 Yuan each month. In the first month of the fourth year (37th installment), the monthly payment of principal and interest are 3,086.42 Yuan and 3,465.00 Yuan respectively, which are 6,551.42 Yuan in total. Following this, the amount to be repaid will decrease by 10.69 Yuan per month.
Compared to the CAM method, EZ Pay lightens the burden of loan repayment for the first three years. In the first three years, the average monthly savings that can be made compared to the CAM method is 2609.34 Yuan, nearly 100,000 Yuan for the total (i.e. 93,936.25 Yuan). From the fourth year onwards, borrowers are only required to pay an average of 482.43 Yuan extra per month for the remaining 27 years as compared to the CAM method.
★ Targeted Customer Group
The EZ Pay is especially suitable for young white collar workers who are just starting their careers and people that are under financial pressure at particular stages of their lives, such as couples soon to be married and parents whose children are seeking education. It can substantially lighten the burden of repayment for a certain period of time and free-up more capital for use.
About Bi-weekly Pay
“Bi-weekly Pay” is a brand-new loan repayment mode that the Industrial Bank is launching for medium and long-term personal housing loan borrowers and personal commercial property loan borrowers. The mode allows clients to repay principal and interest every two weeks. “Bi-weekly Pay” can be divided into two separate versions depending on whether the loan term is shortened, namely interest-saving and pressure-relieving.
★ Features
• Make savings on interest payments for optimized financial standing
Interest-saving Bi-weekly Pay increases the frequency of repayments and shortens the loan term, thus minimizing interest repayments without altering the repayment burden of the loan.
• Lower monthly payments to lighten loan burden
Pressure-relieving Bi-weekly Pay raises the repayment frequency without shortening the loan term. It allows borrowers to pay a bi-weekly amount less than half of the original monthly payment, thus easing repayment pressure.
★ A comparison between Pressure-relieving Bi-weekly Pay and CPM (constant payment mortgage) repayment method
Pressure-relieving Bi-weekly Pay V.S. CPM method | |||
RMB 1 million loan; 30 years; 30% below benchmark interest rate. i.e. (4.158% for loans over 5 years) | |||
Unit: RMB Yuan | |||
Loan term | CPM monthly payment | Bi-weekly Pay | Monthly saving |
10y | 10,199.77 | 4,699.67 | 800.43 |
15y | 7,476.31 | 3,446.36 | 583.58 |
20y | 6,143.38 | 2,838.08 | 467.22 |
25y | 5,366.00 | 2,482.87 | 400.25 |
30y | 4,865.69 | 2,252.76 | 360.17 |
In the CPM method, the customer has to pay principal and interest totaling 4,865.69 each month for 360 months.
With Pressure-relieving Bi-weekly Pay, the customer pays principal and interest totaling 2,252.76 Yuan every two weeks in the same loan term but in 783 installments. The bi-weekly payment is 180 Yuan less than half of the monthly repayment of 4,865.69 Yuan in the CPM method, meaning that a monthly saving of nearly 360 Yuan can be made.
★ Targeted Customer Group
Pressure-relieving Bi-weekly Pay is suitable for customers who are under financial pressure from loan repayments. Within the same loan term, it enables borrowers to save hundreds a month on their loan repayments as compared to the CPM method.
★ A comparison between Interest-saving Bi-weekly Pay and CPM repayment method
RMB 1 million loan; 30 years; 30% below benchmark interest rate. i.e. (4.158% for loans over 5 years) | |||||
Unit: RMB Yuan | |||||
Loan term | CPM monthly payment | Bi-weekly Pay | Interest saving | Percentage of saving | Time saved |
10y | 10,199.77 | 5,082.79 | 19351.11 | 8.64% | 11m |
15y | 7,476.31 | 3,735.82 | 34463.33 | 9.97% | 19m |
20y | 6,143.38 | 3,069.95 | 53026.11 | 11.18% | 27m |
25y | 5,366.00 | 2,680.96 | 76290.27 | 12.51% | 37m |
30y | 4,865.69 | 2,431.33 | 105635.18 | 14.05% | 49m |
In the regular CPM method, the borrower has to pay principal and interest totaling 4,865.69 each month for 360 months, with the interest for the loan totaling at 751,648.19 Yuan.
With Interest-saving Bi-weekly Pay, the borrower pays principal and interest totaling 2,431.33 Yuan every two weeks in 667 installments, with basically the same monthly repayments as the CPM method. However, owing to the fact that principal is being returned faster, the loan term is shortened from the original 360 months to 311 months, which means that the loan is returned 4 years in advance. The total interest is 646,013.01 Yuan, which represents a saving of 105635.18 Yuan or 14.05% as compared to the CPM method.
★ Targeted Customer Group
The Interest-saving Bi-weekly Pay is suitable for people who have a stable income and the ability to carry out financial plans. With basically the same monthly payments, it shortens the repayment period and reduces the interest payments of the loan.