Want to take a home loan overdraft facility? Here are its pros and cons
Also Read: Income tax: Home loan benefits when two houses are self-occupied The lender establishes an overdraft limit, usually matching your home loan balance. You are provided with a linked savings or current account to oversee the overdraft. You also have the option to deposit additional funds into this account, which will be used to prepay your home loan and lessen your interest payments.
The primary advantage is the ability to access funds from the overdraft limit, up to a specified amount, when required. Using the home loan overdraft facility functions as a two-way avenue: By placing any additional funds in the linked account, you can decrease your home loan principal and cut down on interest. Additionally, you can utilise the untapped portion of your home loan limit for unexpected or planned expenditures.
Interest is applied solely to the amount withdrawn. If you're contemplating a home loan overdraft facility, here are several advantages to consider: Flexibility: Similar to a line of credit linked to your home loan, you can access funds whenever you need them , up to a certain limit, and you'll only be charged interest on the amount you use. This can be beneficial when unforeseen expenses arise.
Also Read: Home Loans: Top 5 banks including HDFC, SBI with lowest rates of interest – check full list Potential interest savings: Unlike conventional fixed-rate home loans, which may charge a fee for prepayment, a home loan overdraft enables you to deposit additional funds into the linked account, thereby reducing the overall principal of your home loan.
