If you are a property owner and haven’t used it to grow your wealth, you might be sitting on untapped financial potential. What if you could turn your property into funds to finance your dreams? This is exactly what overdraft or OD loans against property can help you with.
OD against property helps you leverage your real estate to secure a financial line of credit. You can use this sum to start or expand your business, consolidate debts, invest in other property and more.
Keep reading to find out more about OD against property, features, advantages and disadvantages.
What is an overdraft loan against property?
An overdraft or OD loan against property allows you to borrow money up to a certain limit based on the value of your property. This type of loan provides you with a credit line that you can draw from as needed. This means you can manage your finances better without having to take out a fixed loan amount upfront.
Once your property is appraised and the OD limit against property is established, you can access the funds at any moment. The key benefit is that interest is charged only on the amount you actually use, not on the total OD limit. This makes it cost-effective as you won’t have to pay interest for unused amounts.
Features of an OD against property
The OD against property comes with various features that add to its flexibility. The OD loan offers values between Rs. 10 Lakhs and 3 Crore with a tenure of up to 15 years at starting interest rates of 10.10% per annum.
Additionally, features of this financial tool include:
1. Flexible withdrawals
This loan type allows you to withdraw any amount up to the set OD limit against property, enabling you to borrow only what you need and avoid interest on the unused portion. For instance, if your OD limit is Rs. 10,00,000 and you require only Rs. 5,00,000, you can withdraw just that amount, and avoid overborrowing.
2. Interest payments
OD against property interest rates are calculated only on the amount you withdraw and not on the total amount that was approved. So if you withdraw Rs 5,00,000 from a Rs. 10,00,000, you pay interest only for the Rs 5,00,000. This is a contrast to traditional loan on property where the interest rate is applied to the entire loan amount regardless of whether you use all the funds.
3. Repayment flexibility
In a traditional loan against property, repayments are made through monthly instalments or EMIs, typically calculated with a Loan against Property EMI calculator. Conversely, with an OD against property, you have the flexibility to deposit funds into your OD account whenever you have surplus cash.
4. Continuity
A regular loan against property closes once the loan amount and interest is fully repaid. However, an OD against property remains in place until your or your lender decides to terminate it. This means you will have ongoing access to a financial line of credit and will be able to use it as and when needed.
Advantages of an OD loan against property
1. Accessibility: One of the most significant advantages of an Overdraft Loan Against Property is the ease of access to funds. You always have access to your approved limit which is beneficial if you have fluctuating expenses. The amount can also be used for diverse purposes.
2. Cost-effectiveness: OD loans against property are more economical than regular property loans in scenarios where the full loan amount is not required immediately. Interest is charged only on the utilised amount. This makes it a good choice for short-term financial needs.
3. Convenience: Flexible repayment and the lack of fixed EMI schedules make this loan option incredibly flexible. This is great if you have a variable income as you can repay the loan based on your convenience whenever possible to reduce interest costs.
4. Ongoing credit: You get a long-term financial safety net when your OD limit gets approved. As long as your account remains in good standing without defaults your OD will continue to exist and you can withdraw from it at any time.
How to apply for an OD loan against property?
To secure a Loan Against Property Overdraft you need to follow the following steps for a smooth and efficient application process.
1. Complete the application Form
Start by filling out the application form online. Ensure all the information you provide is accurate to avoid any delays in the approval process.
2. Upload required documents
After completing the application form, you will need to upload the following documents:
- A duly filled application form.
- A photograph for identification.
- Valid identity proof
- Proof of residence
- A document for signature verification.
- Income details
3. Loan approval and disbursement
If your application meets their criteria, your loan will be approved, and you will be able to access your OD limit promptly.
Eligibility for OD against property
To be eligible for a OD loan against property you must meet the following criteria:
1. General Eligibility: Applicants must be at least 23 years old at the time of application with a stable employment history of at least 3 years in their sectors. The maximum age at loan maturity is 65 for salaried and 70 for self-employed individuals.
2. Income Requirements: Salaried individuals need a minimum monthly net income of Rs. 15,000. Self-employed professionals and individuals must have a minimum annual income of Rs. 2,50,000.
3. Stability Criterion: All applicants must demonstrate a minimum of 3 years of employment or self-employment
Final thoughts
OD against property is a cost-effective financial tool to use your property for financing. It does not lock you into a fixed interest cost like a traditional loan against property and gives you much-needed flexibility to align withdrawals with your financial plans.
Tata Capital offers OD loans with competitive loan against property interest ratesflexible repayment terms and convenient online application processes. If you are looking to secure an overdraft against your property, visit the Tata Capital website or download the Tata Capital App for more details!
The details mentioned in this blog may change from time to time and from vendor to vendor or government policies.
20 June 2024
6 mins read
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