How is an overdraft loan against property different from a regular loan?
- Posted: 18th June, 2025
- Updated: 18th June, 2025
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Here is how an overdraft loan against property differs from a regular loan:
| Parameter | Overdraft Loan against Property (LAP) | Regular Loan |
|---|---|---|
| Loan Amount | Credit limits are sanctioned by the loan provider and withdrawals are on demand. | Typically, a fixed amount sanctioned and disbursed upfront. |
| Tenure | Typically, it comes with a shorter tenure and differs from one loan provider to another. | It comes with a longer tenure. |
| Interest Calculation | The rate of interest is calculated only when withdrawn. | The rate of interest is usually on the entire amount sanctioned. |
| Interest Rate | Interest rates are typically lower as property is mortgaged. | Interest rates are usually higher since it is unsecured. |
| Repayment | Usually, it offers a flexible interest payment as per usage. | Typically, it comes at a fixed Equated Monthly Instalment (EMI) for the entire tenure. |
| Disbursal | On-demand withdrawals when required | Full disbursal upfront in one go |
| Processing Time | Faster as collateral is involved | Slower as an unsecured loan |
| Collateral | Requires pledged property | May not need collateral |
These differences make each type of loan suitable for specific needs. Overdraft loans are often preferred for flexible, short-term funding requirements, while regular loans are typically chosen for larger, long-term financial commitments.
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