Convert your Loan Against Property to a Mortgage Overdraft Loan

Both property mortgage and a mortgage overdraft loan are quite viable and popular mortgage options in the finance industry. However, prospective applicants often confuse their functionality and meaning, thus, inadvertently choosing the wrong option or defaulting on repayments. 

This article aims to further educate possible borrowers on both of these mortgage options, so they can make better informed decisions while choosing one.

How to apply for an overdraft loan against property?

To avail of an overdraft loan against property, individuals can contact their respective lenders, or simply follow the below-mentioned 5 steps:

Step 1: Set mortgage requirements by visiting the ‘Loan Against Property’ page.

Step 2: Review the property loan eligibility criteria.

Step 3: Check the rate of interest and applicable fees.

Step 4: Fill up the application form with relevant details.

Step 5: Submit the online loan application form.

Furthermore, applicants can use a mortgage loan EMI calculator to efficiently plan their repayment schedule.

What is a mortgage overdraft loan and how does it work? 

Overdraft loans enable borrowers to take a credit even if their account balance is at zero. In addition, borrowers only pay interest on the amount of credit they use and not on the entire loan quantum.

While sanctioning an overdraft loan, lenders create an overdraft account in the borrower’s name. Lenders credit the loan quantum in this overdraft account in segments, as per the borrower’s requirements.

What are the benefits of converting to an overdraft loan against property?

Here are the benefits of converting a loan against property into an overdraft loan:

  • More savings on interest

This is debatably the most significant advantage of a mortgage overdraft loan over a property mortgage loan. Since mortgage overdraft loans are disbursed in parts, borrowers only need to pay interest on the amount of loan they use. Additionally, using a mortgage loan calculator further aids in the estimation of how much interest one saves opting for an overdraft loan.

  • No additional prepayment fees

In the case of an overdraft loan, borrowers can choose to make innumerable prepayments to reduce their overall repayment quantum, without any additional prepayment fees. These prepayments can even exceed the set EMI value and still, there will not be any penalties.

  • Guaranteed liquid funds

Applicants can withdraw any amount of capital from the pre-decided quantum at any time they need. Thus, overdraft loans eliminate any concerns borrowers may have regarding access to liquid funds.

How is a mortgage overdraft loan different from a property mortgage loan?

Here are the differences between a loan against property and an overdraft loan against property:

  • Loan against property

The following are the 4 specifics of a property mortgage loan that differ from a mortgage overdraft loan:

  • Credit method

Lenders sanction and disburse the total loan quantum to the borrower’s account in one go.

  • Interest rates

Being secured with collateral, property mortgage loans offer competitively low-interest rates.

  • Repayment onus

Borrowers repay the loan quantum based on the predetermined EMI repayment schedule.

  • Interest outflow

Individuals pay interest on the entirety of the sanctioned loan quantum irrespective of usage.

  • Overdraft loan against property

The following are the 4 particulars of a mortgage overdraft loan that differ from a property mortgage loan:

  • Credit method

Lenders credit the loan quantum in segments, according to the borrower’s needs.

  • Interest rates

Since mortgage overdraft loans offer various flexibilities, the interest rates charged are higher than that of a property mortgage loan.

  • Repayment onus

Borrowers can repay their debts when they have liquidity overabundance, with no penalty charges on prepayments.

  • Interest outflow

Individuals pay interest on the amount of loan quantum they use and not the entirety of the credit.

A lot of lending institutions extend pre-approved offers on home loans, loans against property, and other loan types. This streamlines the loan application procedure, and as a result, saves time. Individuals can check their pre-approved offers by entering the necessary details.

With a clearer understanding of both of these mortgages’ roles and functionalities, borrowers can make better-informed decisions while opting for these mortgage options. Also, individuals who already have opted for a loan against property can better judge whether they should convert to a mortgage overdraft loan or not.

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