Buying a house has become very difficult these days because property prices are rising fast. Still, everyone needs a home to live in. For this, many people take a home loan to fulfill their dream. But after taking the loan, people get tired of paying EMIs every month. Many times they think about when they will get relief from this burden.
If you want some relief in EMIs, you can save on interest by opening a home loan overdraft (OD) account. In this account, you can withdraw extra money whenever you need and also deposit money whenever you want.
What is a home loan OD account?
In a home loan overdraft (OD) account, you can deposit extra money in your loan account. When you add money, the interest becomes less and the loan period can also reduce. But the interest rate in OD account is a little higher than normal home loan. Big banks in India charge 0.2% to 0.5% more interest on this account. Still, it can help you save more money than a normal loan account. You can also repay the home loan in one go. This facility also helps in emergency.
Benefits of home loan overdraft facility
This facility is very useful for loan takers. You do not have to wait for 20 to 30 years to repay the loan. You can pay the loan early by depositing a lump sum. Customers can also choose home loan transfer option. This can also help reduce the interest rate.
How does it work?
Customers can put extra money in their OD account. The bank charges interest only on the remaining loan amount after deducting the extra money. This reduces the interest and also shortens the loan period. You can also take out money from the OD account when needed and deposit again anytime. In emergency, this is very helpful. In this facility, you also get flexible repayment. You can pay more than the EMI, and this extra money is called surplus amount.
Things to keep in mind
This facility also has some disadvantages. The interest rate is higher than normal home loan. Your savings can also finish if you use this facility without planning. So, use OD account only if you have extra money. Otherwise, it can become costly for you.