A comprehensive look at the Home Loan overdraft facility

A home loan overdraft account is a financial tool that helps reduce your home loan burden

A home loan is a massive commitment that extends for many years. It is challenging for customers as the EMIs on home loans are high. Late payment attracts additional charges and affects credit score, which keeps customers under constant stress.

Banks understand the psychological and financial challenges of a home loan. To reduce the burden on the customers, banks provide many facilities. One of them is the overdraft home loan. It is one of the most useful home loan options, especially among customers who want to pay off their mortgage faster. While an overdraft facility is a brilliant way to pay off a house loan, it is not suitable for everyone. You can check and easily apply for easy loan. Continue reading to know everything about the home loan overdraft facility.

What is a home loan overdraft facility?

Overdraft is a type of credit provided by lending organisations. It allows the borrower to deposit any amount above the loan amount and withdraw funds as needed. The lender opens an account for you with an overdraft limit. It is equal to the amount owed on your home loan. You can repay the loan by depositing it into the account. Any additional deposit is called a prepayment, and it helps lower the loan's unpaid principal and interest costs. You can also withdraw up to the limit and pay it back with interest.

How does an overdraft home loan function?

Your home loan account is connected to your current or savings account if you choose to use the home loan overdraft facility. Your payments go into your home loan account. Prepayment of the house loan is defined as any amount over the EMI. The extra money reduces your outstanding principal, lowering your monthly mortgage payment and interest rate. The more money you put into your home loan account, the faster you will be able to pay it off. You can move any amount immediately from your savings account to your home loan overdraft account.

You can withdraw money from your home loan account in the same way that you can add extra money to prepay the loan. Any money taken out must be repaid along with interest, if applicable. The amount withdrawn results in an increase in the principal of your home loan.

Withdrawals are not permitted once the limit has been reached. It amounts to up to 25% of the total loan amount. It could, however, differ based on the bank's internal policies.

Borrowers can use the money withdrawn from the overdraft facility the way they want. The facility can be used even after the home loan has been repaid. Interest rates are then calculated according to the fixed contractual terms.

How to withdraw funds from a home loan overdraft account?

Your home loan overdraft account is connected to your savings or current account. You can move money from your overdraft account to your savings account whenever you choose with the help of mobile banking. It is like receiving a bank loan. After the withdrawal is completed, the repayment method or tenure is adjusted. Some lenders also offer chequebooks and ATM-cum-debit cards exclusively for overdraft accounts, allowing them to undertake multiple operations. The interest rates on overdrafts are slightly higher than on ordinary home loans.

The difference between the home loan interest rate and overdrafts is even more at Metra Trust. With its competitive home loan interest rates and world-class customer service, Metra Trust is one the best banks to access the home loan overdraft facility. To know more, click here. 

Disclaimer

The contents of this article/infographic/picture/video are meant solely for information purposes. The contents are generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. The information is subject to updation, completion, revision, verification and amendment and the same may change materially. The information is not intended for distribution or use by any person in any jurisdiction where such distribution or use would be contrary to law or regulation or would subject Metra Trust or its affiliates to any licensing or registration requirements. Metra Trust shall not be responsible for any direct/indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information mentioned. Please consult your financial advisor before making any financial decision.