Loan Against Property and overdraft loan are popular terms in the mortgage sector, but their meaning and functionality can often confuse prospective borrowers. Here are what both loan types mean:
- Loan Against Property: This loan type facilitates the sanction of a loan amount against a pledged collateral, which in this case is an immovable asset, namely a property you own.
- Overdraft Loan: An overdraft loan allows you to borrow from your account even in the advent of a zero-balance situation. Above that, borrowers have to pay interest only on the amount used by them.
Now that the meaning of an overdraft loan is clear, let's understand what the overdraft facility on a Loan Against Property means.
When the Overdraft Loan Against Property facility is extended to you, you are essentially allowed to access the sanction amount in slabs, as per your need and convenience. Your lender opens a separate overdraft account in which the loan amount is disbursed in parts, upon your preference.
Another notable feature of operating an Overdraft Loan Against Property is that you can make any number of deposits back into the loan account; be it above your monthly EMI, and it counts as prepayment. However, the most important aspect of this credit facility is that you pay interest only on the portion of the loan amount that you have requested and used, unlike the regular Loan Against Property.
Guarantees Liquidity
Borrowers do not have to worry about facing a cash crunch, as they can withdraw from their predetermined loan sanction whenever they please, depending on when an expense arises.
Higher Interest Savings
Borrowers don’t have to pay blanket interest on the entire loan sum sanctioned to them. As they can seek the loan sum in parts, they pay interest only on the amount they have used and not overall.
With the function and role of both loan types clearly defined, what remains are the key differences between a Loan Against Property and an Overdraft Loan Against Property. Understanding their unique offerings will help you select the right loan type to meet your needs.
| Loan Particulars | Loan Against Property | Overdraft Loan Against Property |
|---|---|---|
| Credit Line | The entire sanction amount is disbursed for your use at one go, which is beneficial for large scale expenses, such as business expansion | The approved loan amount can be accessed in parts, depending on when you need it, making it ideal for expenses that come in phases |
| Security | A Loan Against Property is sanctioned against an asset that is pledged as collateral | The credit line extended to you through the overdraft facility also depends on the value of your collateral |
| Interest Rate | Loans Against Property are secured loans, and hence enjoy lower interest rates | Overdraft Loans Against Property, while being secure, are still charged a higher rate of interest because of the flexibility it offers |
| Interest Outflow | Borrowers must pay interest on the whole loan sanction as it was disbursed into their account | Borrowers only pay interest on the loan amount they have utilised and not on their whole credit limit at one go |
Note: Bajaj Housing Finance offers selective Flexi-Loan schemes available to eligible applicants. For more information, please visit your nearest branch or connect with our customer services.
Describe the steps for Overdraft Loan Against Property
Overdraft against property also known as Loan Against Property Overdraft can be availed from Bajaj Housing Finance using the same steps used to apply for a Loan Against Property:
- Click on Apply Now
- Enter your details and select the type of Loan as ‘Loan Against Property’
- Generate OTP and use it to go to the next page
- Here you will be asked about a few more details particularly about the property you wish to take an overdraft loan against
- Submit the form and wait for a customer representative to call you back
*Terms and conditions apply.
FAQs
No, Loan Against Property cannot be converted to overdraft primarily because a Loan Against Property disbursal happens in a lumpsum while an overdraft disbursal is done in slabs via an overdraft account.
Eligibility for overdraft loan is the same as that of Loan Against Property. You may visit the ‘eligibility’ section to know more.
