Loans against property are also known as property loans or simply mortgage loans in India. Under these loans, people who own a residential or commercial property can pledge it as security and avail of a loan against it. Since the loan is backed by collateral, lenders charge a low rate of interest on these loans. The loan amount sanctioned depends on the value of the collateral. 

In general, borrowers can expect to avail themselves of a loan amount equal to up to 75% of a property’s market value. Further, these loans come with loans against property tax benefits and borrowers can also benefit from facilities, such as loans against property balance transfer. 

In this article, we talk about overdraft loans against property — what it means and how can it benefit borrowers. 

What is an Overdraft Loan Against Property? 

The overdraft loan against property is a facility offered by some lenders to their most trustworthy clients. Using this facility, borrowers can borrow money from their accounts even when there are no funds available in it. Further, when a borrower uses the overdraft facility, they are charged interest only on the loan amount that they use. 

When someone opts for an overdraft loan against property, the lender gives them the right to withdraw funds in slabs. Further, the borrower can deposit money into the overdraft loan account as and when they want. This money can eventually go towards interest repayment or even pre-payment, thereby helping individuals close their loan account before the agreed tenor. 

If you wish to avail yourself of the overdraft loan against property, the first thing that you must know is that not every lender offers this facility. If your current lender does not offer the overdraft loan against the property, you can transfer the remaining balance on your loan to another lender who offers this facility using the loan against the property balance transfer option. However, since loans against property balance transfer involve a fee, one must choose to transfer their loan after carefully weighing both the advantages and the disadvantages. 

There are a few key differences between a normal loan against property and an overdraft loan against property. Here, we highlight these differences: 

  1. In the case of a loan against property, the entire amount is disbursed into the loan account of the borrower. However, in the case of an overdraft loan against property, your lender puts the money into a linked account and you can access credit as and when you need it. 
  2. Loans against property generally draw a lower rate of interest than overdraft loans against property. Lenders charge a higher rate of interest on overdraft loans against property because of the flexibility offered by lenders in the case of these loans. 
  3. In the case of a loan against property, an individual pays interest on the entire amount availed of. However, in the case of an overdraft loan against property, an individual pays interest only on the amount used by the borrower. 

So, are there any specific overdraft loans against property eligibility criteria? The answer is no. The overdraft loan against property eligibility criteria is the same as the eligibility criteria for as loan against property.