Home loan overdraft facility: Eligibility, documents, interest rate, how to get it
What is a home loan overdraft facility?
The concept of a home loan with an overdraft facility is gaining popularity as a financial tool. It is basically an extension of a conventional home loan, which provides the borrower the option of parking any additional funds in a linked account. This offsets the interest payable on the outstanding loan amount and becomes a flexible and cost-effective way to manage home loans. Here is how one can go about availing of the facility.
Home loan: Choose a lender with an overdraft option
The first step is to identify lenders that offer overdraft facilities. Not all financial institutions or banks provide this option, so it is crucial to conduct thorough research.
Home loan: Meet eligibility criteria
Prospective borrowers must meet the eligibility criteria. This includes factors such as creditworthiness, income stability, and the value of the property being financed.
Home loan: Do remember this
The borrower initiates the application process. During this stage, it’s essential to express interest in the overdraft facility and understand the associated terms and conditions.
Application evaluation by lender
The lender evaluates the borrower’s financial profile and assesses the feasibility based on the credit history and repayment capacity of the borrower.
Documentation
Completing the necessary documentation is a critical phase. Borrowers must provide proof of income, property documents, and other standard documents.
Approval and disbursement
On successful evaluation and documentation, the lender approves the home loan with an overdraft feature. The sanctioned amount is then disbursed.
Interest savings
Surplus funds in the linked account offset the interest on the outstanding amount. Interest savings can lead to faster repayment of principal, reducing the loan tenure.
