Overdraft facility is available on home loan, know its pros and cons before taking it

Overdraft facility is available on home loan, know its pros and cons before taking it

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new Delhi. Most of the people prefer to take home loan from banks to buy their house. Since a large amount is available in this and it also gets a long time to repay it, so there is not much burden. Nowadays many banks have started offering overdraft facility as well.

Actually, the facility of overdraft on home loan is to provide an additional amount in the hands of the borrower in a way. If you have also taken a home loan and want some more financial assistance for a short period of time, then you can apply for an overdraft in the bank. However, it is very important to know some basic things before availing this facility.

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High interest rate should not become a burden
The overdraft facility offered by banks in the form of short term credit on home loans attracts a higher interest rate than the normal rate. This gives you money in an emergency, but it can also cost you dearly. Therefore, it must be known from the bank that what will be the cost of an overdraft. While availing this facility, home loan borrowers should understand its advantages and disadvantages.

Flexible repayment facility
Banks provide this facility to those borrowers, who also increase the amount of EMI when their income increases. The extra money you put into your account reduces your total outstanding principal and interest. This method of expediting home loan repayment is the best way to save money in the long run.

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Will get money immediately when needed
The overdraft facility in a home loan is similar to a pre-approved loan, where you get the money you need immediately. In this also, interest has to be paid only on the amount, which you have used. For example, the bank gives you the facility of 5 lakh overdraft and you spent only 2 lakh rupees, then you will also have to pay interest for the same two lakh rupees.

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Important things to know before availing the facility
If this facility is used properly, you can use the extra money for prepayment of your home loan. This will also save you from pre-payment penalty. On this, banks charge up to 0.60 percent more interest than a regular home loan. This facility is better for those people who have a large amount in the form of surplus amount.

Tags: Facts About Home Loan, Home loan EMI

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