Flexible Financing: Overdraft and loan against property are two popular credit facilities that many financial institutions provide to borrowers seeking funds. An individual might choose different options while deciding to make a big-ticket purchase or deal with any unexpected emergencies. In the present-day world, both big and small businesses also need funds from time to time to meet financial obligations. Therefore, one must have an idea of both options before availing one.
Continue reading this blog to gain detailed insights into overdrafts and loans against property.
What is the meaning of overdraft and loan against property?
Overdraft loans and loans against property are the two popular terminologies in the financial industry. However, most borrowers need clarification with their working process and functionality. A borrower opts for a loan against property to get substantial funds against the collateral, namely his/her property.
With an overdraft loan, one can borrow even if one has a zero-balance account. Borrowers however pay the interest only on the cash they have withdrawn. With the overdraft facility, if one fails to pay the required line of credit within the specified tenor, a penalty is charged. Not only this, but the repayment amount also increases drastically. This makes the credit facility ideal for short-term cash flow issues.
How do you avail of an overdraft loan against property?
Overdraft against property, known as a loan against property overdraft, is availed following similar steps as a loan against property. Here is a detailed overview of steps one should follow to apply for a loan against property overdraft:
![avail of an overdraft loan against property](https://krogerfeedbacks.net/wp-content/uploads/2024/01/Loan-Against-Property-800x441-1.webp)
Step 1: Fill out the loan against the property application form.
Step 2: Enter all necessary details and choose the loan type as ‘Loan Against Property’.
Step 3: Use the generated OTP that directs to the next webpage.
Step 4: Enter more details, particularly regarding the property against which the overdraft loan is taken.
Step 5: Submit this form and the customer representative will call back soon.
Overdraft loan against property vs loan against property: What are the differences?
Here are some differences between overdraft loans and loans against property:
Overdraft loan against property
- No usage restrictions: No restrictions are imposed on the use of funds that one can avail of through an overdraft facility. The availed amount can be used for any purpose, as required.
- Short-term credit facility: Overdrafts provide borrowers temporary relief in case of cash flow issues. So, if anyone is looking for a long-term plan, this will not be an ideal solution.
- Unsecured loans: Overdrafts are categorized as unsecured loans. Thus, there is no collateral involved and all valuables are expected to remain safe.
Loan Against Property
- Long-term credit facility: Loan against property falls under the category of long-term credit facility. It provides a large amount of money to use for various purposes. The availed loan amount is higher than for overdraft loans.
- Secured Loan: One can avail of this loan only by pledging a residential or commercial property. Thus, a loan against property falls under the category of a secured loan.
- Fixed repayment schedule: Loan against property follows a fixed repayment schedule. Thus, there are no changes in the repayment schedule no matter how the loan amount is used.
Many banks and NBFCs provide pre-approved loans to their existing customers for faster applications. Thus, borrowers can check their eligibility for these offers from the official website after providing their names and contact details.
Overdraft loans against property and loans against property are credit facilities serving different purposes with their features and functions. There is a high rate of interest associated with overdrafts and they are categorized as unsecured loans. Overdraft loans against property are ideal for individuals with varying but urgent needs of funds; for example, funds to run a business.
On the other hand, a large amount of money can be availed with a loan against property for different purposes that include medical expenses, expansion of business, education, and more. The eligibility criteria for a loan against property are also easier to meet. These are ideal for long-term financing requirements.
So before choosing an overdraft and loan against property, make sure to assess financial requirements, why to avail, and the repayment capacity.