What is an overdraft loan against property and how does it work?

An overdraft loan against property is a type of loan where you pledge your property as collateral and receive an overdraft facility from a bank or financial institution. Here is how it works:

• You pledge a house, office, land, etc., as security to the bank or NBFCs (Non-banking Financial Companies). Based on this, the bank or NBFC gives you a sanctioned limit on the amount you can borrow.
• You can withdraw money from this limit whenever you need it, like from your account. You only pay interest on the amount you have taken, not the full limit.
• For example, if the bank or NBFC has given a ₹1 lakh limit, and you have taken ₹20,000 so far, you only pay interest on just ₹20,000, not the full ₹1 lakh.
• This loan is flexible because you can borrow money as many times as you need and repay it in part or full whenever you have funds, unlike Equated Monthly Instalment (EMI) loans with fixed payments.
• This type of loan is useful for business owners and people who need money from time to time for personal or work needs. However, you must repay it properly, or else you risk losing the pledged property.