SMART SURPLUS

With home loan overdraft, you can save on interest without losing access to your cash

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Purchasing a home is often one of the most significant financial decisions in an individual's lifetime, typically requiring a housing loan due to the substantial investment involved.

Housing loans are long-term commitments, with tenures commonly ranging from 10 to 20 years, depending on the borrower's repayment capacity and need. These loans are repaid through Equated Monthly Installments (EMIs), which cover both the principal and accrued interest. Over time, as EMIs are paid, the outstanding loan balance gradually declines.

However, one of the biggest challenges for borrowers is the high cumulative interest outlay. In many cases, the total interest paid over the life of the loan can surpass the original loan amount itself. For this reason, reducing the liability early becomes a key financial priority, especially as individuals move through different life stages with evolving responsibilities and financial needs.

A common strategy to lower this burden is loan prepayment, using surplus funds to pay down the principal and thereby reduce future interest payments. While effective, this option often comes with prepayment penalties unless explicitly waived in the loan agreement, making it less attractive for many borrowers.

An increasingly preferred alternative is the housing loan overdraft facility.

HOW DOES THE HOUSING LOAN OVERDRAFT FACILITY WORK?

A housing loan overdraft facility is a feature offered by many home loan providers, which combines the structure of a traditional home loan with the flexibility of a line of credit. Essentially, the overdraft facility allows borrowers to deposit surplus funds generated anytime into a linked account to reduce their interest burden, while still retaining access to those funds when needed.