Reduce your home loan interest with the Overdraft (OD) Facility, offering convenience and savings. Use our Overdraft Facility Calculator to see its impact on your loan.
Save on 30+ Home Loan EMI’s with Overdraft Facility
How Does an OD Make a Difference?
Consider the following scenario:
- Loan Amount: ₹80 Lakhs
- Interest Rate: 8.5% p.a.
- Tenure: 30 years
- EMI: ₹61,513
Without OD:
- Total Interest Paid Over 30 Years: ₹1,41,44,709
- Total Payment: ₹2,21,44,709
With OD (Parking ₹5 Lakhs):
- Outstanding Principal: ₹75 Lakhs
- Total Interest Paid: ₹1,27,60,664
- Total Payment: ₹2,07,60,664
Savings:
- Total Savings: ₹13,84,045
- Annual Savings: ₹57,669
This example demonstrates significant savings with just ₹5 Lakhs parked in the OD account!
Who Should Consider an OD Facility?
- Salaried professionals with irregular income (like quarterly bonuses)
- Entrepreneurs with variable cash flows
- Anyone aiming to optimize their home loan with OD facility and savings strategy
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The Essentials of Home Loan Overdraft
Understanding the basics of home loans, including the types available and their features, is crucial. Traditional home loans are straightforward, offering fixed or variable interest rates over a set repayment period. Overdraft home loans, on the other hand, add a layer of flexibility, allowing you to adjust your repayments. This in turn helps you potentially save on interest, depending on how you manage the facility.
How Overdraft Interest Calculators Work?
These calculators are designed to help you understand the potential savings and costs associated with using an overdraft facility with your home loan. You’ve to input details such as your loan amount, interest rate, and the additional payments you can afford.
Then the calculator provides you with a snapshot of how the overdraft could affect your loan term and interest paid. You can find various options like HDFC overdraft interest rate calculator, SBI overdraft interest rate calculator, or even a Bank of Baroda OD interest rate calculator online.
Benefits Of Using an Overdraft Facility Calculator
| Benefit | Description |
|---|---|
| Interest Savings | By making extra repayments into your overdraft account, you reduce the principal balance faster, thereby saving on interest costs over the life of the loan. |
| Flexibility | The overdraft facility allows you to access additional funds up to a pre-approved limit, offering flexibility for unexpected expenses or investment opportunities. |
| Financial Planning | Using an Overdraft Facility Calculator helps in effective financial planning by providing a clear picture of how additional repayments impact your loan term and interest. |
| Budget Management | It encourages better budget management by showing the benefits of allocating extra funds towards your home loan, helping you make informed decisions about your finances. |
| Customized Scenarios | The calculator allows you to input different repayment scenarios, helping you understand the impact of various financial strategies on your home loan. |
| Debt Reduction | By effectively using the overdraft facility, you can reduce your overall debt level faster, leading to financial freedom sooner. |
| Cost Transparency | The calculator provides transparency about the costs associated |
How to Use Credit Dharma’s Overdraft (OD) Calculator?
Gather your loan details
Before you begin, make sure you have all the necessary details of your home loan at hand. This includes your loan amount, interest rate, loan term, and any additional repayments you’re currently making or planning to make.
Input your Loan Amount
Enter the total amount of your home loan into the overdraft calculator. This should be the principal amount you borrowed or currently owe.
Specify the interest rate
Input the annual interest rate of your home loan. If you have a variable rate, use your current rate or the average rate you expect over the loan term.
Loan Term
Enter the original term of your home loan, typically in years.
Overdraft Details
Enter the amount you plan to deposit into the overdraft account above your regular home loan repayments on a monthly basis.
Analyze the results
After inputting all the required information, the calculator will show you how the additional repayments will affect your loan. Look for the new estimated payoff date, the total interest saved, and how much sooner you could be debt-free. This is similar to how an OD EMI calculator works.
Adjust and Experiment
One of the great features of an OD calculator is the ability to adjust your extra repayment amounts. This is to see how even small changes can have a big impact over time. Experiment with different figures to find a balance that works for your budget and financial goals.
Get Flexible Prepayment with a Home Loan Overdraft Facility
Conclusion
The Overdraft Facility Calculator stands out as a pivotal tool in managing your home loan. By understanding and utilizing this calculator, you’re taking a proactive step towards optimizing your loan repayments and enhancing your financial health. Remember, every bit extra you repay on your loan can significantly reduce the amount of interest you pay over the life of the loan and shorten your loan term.
Making informed decisions about your home loan overdraft facility is crucial to your financial wellbeing. If you’re considering to explore OD options , let Credit Dharma guide you
Frequently Asked Questions
An Overdraft (OD) facility in a home loan is a feature that allows you to deposit extra money into your loan account, beyond your regular mortgage repayments. This reduces the loan balance temporarily, decreasing the interest charged. You can withdraw the extra funds if needed, offering flexibility while potentially saving on interest and shortening the loan term.
Yes, by depositing extra funds into your overdraft account, you reduce the principal amount of your loan more quickly than scheduled. This reduction in the principal balance results in lower interest charges, potentially saving you a significant amount of money over the life of your loan. The actual savings will depend on the amount of extra funds you deposit and how long they remain in the account.
It’s a good idea to use the calculator periodically. Especially if there are significant changes in your financial situation, interest rates. Or if you’re planning to deposit a lump sum into your overdraft account. Regularly reviewing your loan and potential savings can help you stay on track with your financial goals.
Not at all. Most Overdraft Facility Calculators are user-friendly. They require only basic information about your loan, such as the loan amount, interest rate, term, and the amount of extra money you plan to deposit. By inputting this information, the calculator can show you how using the facility could affect your loan term and interest payments.
HDFC Home Loan
SBI Home Loan
