What’s the difference between home loan overdraft scheme and housing loan?

Do you want to invest in property in India and looking forward to borrowing money from the bank? Have you heard about terms like a home loan and overdraft but don’t know the different between them? Do you want to know which is more beneficial between loan and overdraft for home buyers in India?

residential property in india

When visiting banks or other housing finance institution providing financial support to the people interested in property in India, you will come across these terms. If you have been delaying your decision of applying for a home loan due to confusion about these two terms, here is the difference for you.

Home loan

A home loan is a capital that you borrow from the bank to make payment for your new residential property. Based on your income and age, the bank gives you a specific amount for a certain period of time. The rate of interest is on the loan is decided as per the bank’s base rate. You get the freedom to choose between fixed or floating interest rate. According to the duration of the loan, banks decide monthly EMI that you need to pay every month.


Every home loan borrower wants to get rid of the debt before the actual tenure. For this, they avail a pre-payment facility. But this comes with its own limitations like the maximum and minimum amount of pre-payment. Further, you never know when you get a financial emergency after paying a pre-payment for a loan. In such a situation, the bank gives you a home loan overdraft facility where you can withdraw a limited amount of money as an overdraft. This facility is available against fixed deposits or other securities.

A few real estate sites in India also have special sections for home buyers looking for a home loan. These sections have detailed information about the process and other terms used by banks.

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Difference between a home loan and an overdraft

Interest: On regular home loan interest is calculated on the outstanding principal amount while in case of an overdraft, interest is calculated on the book balance.

Duration: Generally overdraft is availed for a short duration while home loan in most of the cases ranges from 3 to 25 years.

Payment: Home loan is repaid through Equated Monthly Installments (EMI) whereas payment for an overdraft is made in a lump sum.

Every real estate website that offers genuine information includes all the details that home buyers need to make a profitable decision. This also includes details of home loan facilities and process.


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