Dear Shreekanth,
Can you kindly explain me the difference between loan and overdraft?. Can one buy a house/flat using overdraft?. In overdraft is the interest rate fixed/floating? If one has a choice to buy house/flat using one of the above, which option will the good? While availing housing loan which one is better fixed rate loans or floating rates?
Regards,
1 Answers
Hi,
Home loan - is a capital that you borrow from your bank or lender for a specific purpose with specific set of terms & conditions (tenure, rate, payment mode etc.,).
OD - Generally issued to you against your bank account or FD or any other security. There is no specific tenure as such for repayment. The interest you pay is only limited to the overdraft money you are actually using and not the full overdraft limit. The purpose of OD can be for anything. The amount issued as OD is generally small amount. The interest rate is fixed (can vary from bank to bank).
Off late, you can see banks or financial institutions offering a home loan plan with OD facility.
Which one is better? - It depends on your requirements, income levels, tax planning, etc.,
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