Owning a house or land in India is many a times seen as a way to secure your financial future. An overdraft loan against property helps you to access funds based on your property’s value, without selling it. Unlike a regular loan, this facility acts as a credit line, allowing you to borrow as needed and pay interest only on the amount used. This isn’t like a regular loan where you get a lump sum and start paying it back immediately. Instead, it’s a credit line you can dip into whenever you need, paying interest only on what you use.
Whether running a business or handling personal expenses, this option offers breathing room. Let’s explain why a loan against property with overdraft makes sense for many looking for flexible financing.
Benefits of an Overdraft Loan Against Property
Here are the key reasons why an overdraft loan against property is a wise choice for many applicants.
1. Use Money When You Need It
An overdraft facility provides access to a predetermined credit limit based on the property's valuation, allowing borrowers to withdraw funds as needed up to the sanctioned limit. This setup helps you manage changing financial needs, since you can withdraw funds as and when required.
For instance, business proprietors may require additional working capital during peak seasonal demand or to capitalise on bulk purchase opportunities. Similarly, individuals may need funds for unanticipated medical expenditures or education expenses. The overdraft structure enables borrowers to access precisely the required amount when necessary and repay gradually as their financial position stabilises, providing significant adaptability for managing irregular cash flow patterns.
2. Pay Interest Only on What You Use
Unlike a typical loan, where interest piles up on the whole amount, an overdraft charges you only for the money you use. This keeps your costs down.
Say you’re approved for ₹40 lakhs but only use ₹8 lakhs to fix your home. You’re only paying interest on those ₹8 lakhs. For anyone juggling finances in India, where every rupee counts, this can mean big savings, especially if you’re not always using the full limit.
3. Cheaper Rates Than Unsecured Loans
Because your property acts as security, lenders usually offer lower interest rates on property loans than on personal loans, which can reach 15% annually or more.
In a country where borrowing can get pricey, this matters. Using your property as collateral makes the lender feel safer, so they charge you less. That lower rate can make a massive difference if you’re borrowing for something big, like expanding a business or funding a child’s education abroad.
4. No Strict Monthly Payments
You don’t have to stick to a fixed repayment plan like regular loans. You can repay the principal on your terms if you pay the interest and stay within your limit.
This relief is for someone whose income fluctuates, like a farmer or freelancer. You can pay more when you’re flush with cash and less when things are tight. Make sure to cover the interest on time to keep the account in good standing.
5. Borrow a Lot if Your Property’s Worth It
The loan amount depends on your property’s market value, typically letting you borrow a percentage. In cities with high real estate prices, this can mean crores.
Owning a flat in Bangalore or a shop in a busy market could unlock serious funds. This makes the loan great for big goals, like starting a new venture or clearing other debts. The exact amount depends on the location and condition of your property.
6. Spend the Money on Anything
There is no rule about how you must use the funds. You can use them for business, medical bills, or a family wedding.
This freedom is a big deal in India, where life throws all expenses your way. Need to pay for a relative’s surgery? Want to invest in new machinery? The overdraft doesn’t tie your hands, unlike some loans that limit what you can do with the money.
7. Possible Tax Savings
Depending on how you use the loan, your interest might qualify for tax deductions under laws like Section 24 for home-related expenses or Section 37 for business costs. Always check with a tax advisor.
If you’re using the funds to grow your business, the interest could be a business expense, lowering your tax bill. Or, if it’s for building a house, you might save up to ₹2 lakhs under tax rules. These savings can make the loan even more affordable, but you’ll need expert advice to get it right.
Conclusion
An overdraft facility against property represents a strategically advantageous financing option for property owners seeking flexible access to secured credit. Thanks to your property's backing, you can borrow what you need, pay interest only on that amount, and enjoy lower rates. The lack of fixed payments, the ability to borrow large sums, and the freedom to use the money however you want to make it a strong option for many. Opting for an overdraft loan against property from a trusted name like Shriram Finance can give you the flexibility to manage your finances as your needs change, while making the most of your property’s value.
Plus, there’s a chance for tax savings if you use the funds wisely. Before signing up, closely examine the fees, like processing or early repayment charges, and make sure your property qualifies. With some planning, this loan can be a powerful tool to keep your finances steady and your goals within reach.
