An overdraft loan is a facility extended by financial institutions where an individual can withdraw money from their current or savings account even when the account balance is zero. It is a short-term credit facility where the borrower must repay the amount and the interest within the defined tenor.
This credit facility is granted to a candidate on both an unsecured and secured basis. Overdraft against property is an example of a secured overdraft. Keep reading this article to know more about the overdraft facility.
How to apply for an overdraft facility?
Borrowing money through overdraft is just like opting for a loan from a lending institution. Several individuals are already entitled to this facility, while others have to apply for the same. In the case of those who are entitled to this facility, it gets activated automatically when the account balance goes negative.
However, new applicants can get in touch with their preferred lending partner to apply for this facility. Most lenders extend an online application procedure with approvals within a minimum turnaround time.
That being said, in case of financial emergencies, where an individual needs a hefty loan amount to fund the expenses, he/she can consider opting for a loan against property. The low interest rates, tax benefits and high repayment tenor are some of the benefits of a loan against property.
Types of overdraft loan
Lending institutions offer both unsecured and secured overdraft facilities. Here are some of the types of overdraft loans:
Overdraft against property
In this overdraft loan, the borrower can obtain up to 50% of the property’s value as the loan amount. An individual with an existing home loan can also apply for this facility.
Overdraft against salary
This type of credit is available against the salary of the borrower. Depending on the lending institution, the approved credit limit can be as high as twice the monthly income of the borrower. Though, the applicant must have a salary account with the same lending partner to opt for this facility.
Overdraft against fixed deposits
Fixed deposits act can be a better alternative than mortgaging property in case an individual does not need a hefty credit amount. Further, the documentation and approval become faster if the borrower has a fixed deposit with the same lending institution.
A loan against property allows borrowers to obtain a sizable amount while keeping their immovable assets as collateral. In case a borrower fails to pay the total amount within the repayment tenor, the lender holds the right to dispose of the property and recover the unpaid dues.
Willing borrowers need to meet the loan against property eligibility criteria and produce the documents as asked by the lending partner to opt for this credit facility. However, an applicant must know the documents required to opt for a LAP beforehand to ensure a smooth borrowing experience.
Moreover, there are tax benefits that a candidate can claim on the interest paid against their borrowed loan amount. Potential borrowers should know how to avail of the tax benefits and exemptions for a loan properly before applying for a mortgage loan or loan against property.
That being said, several lending partners in the Indian market provide pre-approved offers on their financial products, such as LAP, housing loans, etc. These exclusive offers help an individual get easy approval of their application and get the loan amount within the least possible time. To check their pre-approved offers, existing customers must enter their names and contact details on their preferred lender’s website.
To summarise, an overdraft against property can benefit those who require small credit amounts to fund their expenses in an emergency. An easily available credit line sounds exciting, though one should always spend the borrowed amount prudently to avoid financial burdens.
