Want to avail of home-loan overdraft? Do it only if you have surplus funds

Savings done by depositing extra money into the home loan overdraft facility should outweigh the higher interest cost charged from you

When you seek a loan to finance the purchase of your new home, the lender may offer you a home loan overdraft facility to go along with it. Weigh the pros and cons of this instrument before you decide to opt for it.

In this facility, the borrower’s home loan account gets linked to his current or savings account. He is allowed to deposit his surplus funds into this linked account. If the amount deposited is higher than the equated monthly instalment (EMI), the surplus is treated as pre-payment of the home loan and goes towards reducing the outstanding principal.