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Working and Benefits of a Loan Against Property Overdraft

· loan,LAP,property loan

Overdraft over a mortgage loan allows a borrower to avail additional credit on their existing loan, as and when they have a financial requirement. It is similar to different types of flexible loans offered by financial institutions.

Typically linked to financial accounts, loan against property overdraft reduces the overall interest paid on a loan. Here borrowers are allowed to withdraw from their loan account as much as they require. The amount of money in this account is reduced from the principal amount while calculating the loan interest and EMIs.

From individual borrowers to entrepreneurs, overdraft facility can be an effective way to reduce the overall interest along with the availability of adequate funds for different types of financial necessities.

The different benefits offered under the overdraft facility of a loan against property are discussed below –

  • Reduction of interest amount: The interest amount and EMIs are calculated based on the principal of a loan. In case of overdraft on loan against property, the principal amount is reduced since only the portion of loan amount withdrawn is taken into account for interest calculation.

  • Flexibility of tenor: Since borrowers can withdraw as much amount they need, the repayment tenor is also flexible. It depends on the funds withdrawn and subsequent EMI calculations on the loan amount.

  • No restrictions in withdrawal: Loan against property overdraft allows borrowers to avail money as and when necessary without having to go through an intricate process of a loan application.

Although these loans are beneficial, financial institutions have a higher interest rate with overdraft facilities.

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