Mortgage loan and mortgage overdraft differ in quite a number of ways and serve different financial goals. The pros and cons of each are generally the cause of confusion and you may have been in a situation where you’ve wondered which of the two is the better choice. To help address this doubt and provide greater insight on this subject, take a look at these pointers.
A mortgage loan is simply a term loan that the borrower must pay back to the lender over a fixed tenor. With this instrument, borrowers must pledge a self-owned property as collateral to avail funding. Depending on the value of the collateral and the financial profile of the applicant, lenders sanction a loan amount and the interest rate applicable for the tenor.
An overdraft loan is a facility or feature of the primary offering. In this case, it is the mortgage overdraft facility and differs slightly from the traditional offering with respect to its disbursal and repayment. With this feature, the loan amount isn’t directly disbursed to your bank account; rather, it is available to you through a loan account. Additionally, interest isn’t charged on the entire sum you qualify for.
There are several key differences between a mortgage OD and the traditional offering. These include variations in the repayment window, usage and the interest charged. For a more detailed breakdown, read on.
Understanding these differences should address any doubts and help you make the right decision when picking between the two.
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Last update on 28-Sep-2021
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