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Home Loan Overdraft

By Finserv MARKETS - Jul 26,2019
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Guide To Home Loan Overdraft

When taking a home loan, most people plan to repay the loan amount before the tenure ends. After all, paying interest on a home loan for 30 years is not something that would fill you up with excitement. The sooner you repay the home loan, the sooner you can enjoy the true ownership of your home and pay less amount of interest as well.

For this purpose, most home loan applicants make part payments to achieve this objective. Once the part payment is made, the amount is permanently deducted from your account. Thus, in case of financial emergencies, the money that could have been useful becomes inaccessible to you.

Hence, many banks and financial institutes offer a unique facility known as Overdraft Home Loan. Wondering what is home loan overdraft? Keep reading.

What is a Home Loan Overdraft?

When you apply for a home loan overdraft facility, your lender will link your home loan account with your dedicated current or savings bank account. You have the liberty to deposit any extra funds in this account at your discretion (similar to that of your normal savings account).

The surplus amount, after deducting the EMI payment, is considered as a prepayment amount towards your home loan. The interest to be paid is calculated on the outstanding principal amount. Also, you have the option of withdrawing this extra money whenever needed.

This facility, thus, brings down the overall loan responsibility while the interest is charged on the outstanding loan amount only. What makes this facility unique is that you have the option of withdrawing the extra funds as and when you need it. When you withdraw money, the amount is added back to the effective principal amount which was used to calculate the interest.

Your EMI amount is not affected when the extra funds are withdrawn. Additionally, the interest is calculated at a regular basis on your outstanding loan amount on that day; whereas the total interest is deducted at once at the end of the month. Thus, any extra funds deposited in the account is deducted from the principal amount and becomes interest-free immediately.

Factors to Consider When Taking a Home Loan Overdraft

The surplus amount that you pay towards your home loan is not eligible for a refund under Section 80C – mainly since it is considered as a prepayment. Hence, most financial experts advise home loan applicants to first conduct a cost-benefit analysis. This will help you determine whether the prepayment is cheaper or if the savings on the interest support the added premium that is to be paid for this feature.

Benefits of a Home Loan Overdraft Facility

This facility is one of the best options for double income families with surplus funds or entrepreneurs who earn extra funds regularly. Some of the benefits of a home loan overdraft facility include:

  • You can transfer your regular home loan from a financial institution to another financial institution that offers overdraft home loan facilities
  • It has greater liquidity on the deposited amount
  • It is one of the best options for families and individuals with surplus funds
  • You can withdraw surplus funds anytime
  • There is no penalty for prepayment of the loan amount
  • It reduces your loan interest liability whenever some extra funds are deposited

The Bottom Line

Whether you opt for a home loan or a home loan overdraft, make sure that your loan processing is faster and easier. If you are looking for lenders that offer quick loan approvals, get in touch with Finserv MARKETS. Here, you can benefit from features like low EMI, minimal documentation, quick disbursement and more. And if you are eligible, you can avail additional benefits under PMAY scheme. In fact, the loan application is approved in 3 minutes and the loan amount is credited in your bank account within 24 hours.
Also read top things to keep in mind at the prepayment of your home loan.

So, why wait? Apply for Bajaj Finserv Home Loan with us, today!

Finserv MARKETS, from the house of Bajaj Finserv is an exclusive online supermarket for all your personal and financial needs. Loans, Insurance, Investment and exclusive EMI store, all under one roof- anytime, anywhere!


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Bajaj Finserv Direct Limited ("BFDL"), erstwhile Bajaj Financial Holdings Limited is a registered corporate agent of Bajaj Allianz Life Insurance Company Limited and Bajaj Allianz General Insurance Company Limited under the IRDAI composite registration number CA0551 valid till 10-Apr-2021. BFDL also renders services to Bajaj Finance Limited (‘BFL’) and Bajaj Housing Finance Limited (‘BHFL’) (referred hereinafter as ‘Lending Partner’) in sourcing of customers, providing preliminary credit support activities, fulfilment services and post-acquisition customer services related to lending business. Registered Office: Bajaj Auto Limited Complex, Mumbai – Pune Road, Akurdi, Pune – 411 035 CIN: U65923PN2014PLC150522