Overdraft-Linked Loans in Gurgaon, New Delhi, and NCR from leading banks in India.

What is an Overdraft-Linked Home Loan?

Some banks provide a home loan facility linked with an overdraft account, offering greater flexibility and interest savings. This setup involves opening a current account in the borrower’s name, which is directly connected to the home loan.

How Does It Work?

Any funds maintained in this current account act as a temporary repayment towards the loan. The interest is then charged only on the net outstanding loan balance—that is, the loan amount minus the average balance held in the current account.

Let’s understand this with a simple example:

• Loan Outstanding: ₹90,000.

• Average Monthly Balance in Current Account: ₹20,000.

• Effective Loan Amount for Interest Calculation: ₹90,000 - ₹20,000 = ₹70,000.

So, interest is charged on ₹70,000 instead of the full loan amount, leading to savings on interest costs.

Key Benefit: Liquidity + Interest Savings

This structure offers the dual benefit of:

• Lower interest burden (because of the reduced balance)

• Full liquidity, since the amount in the current account can be withdrawn at any time as per the borrower’s need.

The more funds you keep in your account, the more you save on interest.

Impact on EMI and Loan Tenure

Although your EMI remains constant each month, the portion that would have gone towards interest (but is now saved) is instead used to pay off the principal. This helps reduce the loan tenure faster without increasing your EMI amount.

So, the division between interest and principal in each EMI shifts depending on the amount maintained in the linked account.

Other Terms

All other features—such as loan eligibility, processing charges, interest rates, etc.—are typically similar to a regular home loan or Loan Against Property (LAP).

Want a clearer understanding? We’re happy to arrange a personal consultation with our expert—just get in touch, and we’ll schedule a visit at your convenience.