OD limit against property is a blend of overdraft facility and loan against property. This is specially designed to meet the short-term working capital needs of the business community. This is a flexible loan option that enables the borrower to utilise the loan amount as per the requirement.
The overdraft facility against property is a flexible loan option and can be applied with minimal documentation at home.
What is an OD Limit Against Property?
An OD limit against property is a form of credit facility that has characteristics of both a secured loan and an overdraft. This means that the loan applicant can borrow money up to a sanctioned overdraft limit, usually based on the value of the property, and pays interest only on the amount actually used.
The term “overdraft – OD” means that you can withdraw more money than what is in your overdraft account up to an approved limit.
The Overdraft facility against property uses the applicant’s property as collateral which means that if the loan applicant fails to repay the borrowed amount, the lender has the right to take possession of the property to recover the outstanding amount.
Features and Benefits of OD Limit against Property
The overdraft facility against property provides flexibility, allowing borrowers to manage their finances more efficiently. Interest is charged on a quarterly or monthly basis and the principal amount can be repaid at the borrower’s convenience as long as it is within the agreed-upon term.
1. Liquidity Assurance
Borrowers can withdraw money from their predetermined overdraft loan amount at any time. This shields them from potential cash shortages when unexpected expenses arise.
2. High-Interest Savings
Borrowers can enjoy higher interest savings with the flexibility to withdraw the loan amount in parts. Pay interest only on the utilised sum, rather than the entire sanctioned loan amount.
3. Nil Part Payment and Prepayment Charges
Borrowers can make multiple repayments towards the loan without incurring part payment or prepayment charges. This helps them manage the repayment of the loan easily.
Suggested Read: Difference between Prepayment, Part Payment and Pre Closure
Eligibility Criteria for OD Limit Against Property
The OD limit against property can be availed by both salaried individuals as well as self-employed individuals and professionals.
Salaried Individual
- The applicant should have a minimum of three years of employment in a multinational corporation (MNC), public limited company, private limited company, public sector unit (PSU), state government institution, or central government institution. (Types of company registration in India)
- The applicant must be a minimum of 23 years old.
- At the conclusion of the loan tenure, the applicant can be up to 65 years of age or the retirement age, whichever occurs first before the loan maturity date.
Self-employed Professionals
- Professionals such as architects, doctors, and chartered accountants can apply.
- The applicant must be a minimum of 23 years old at the time of application
- The applicant can be up to 65 years of age at the time of loan maturity.
Self-employed Individuals
- Non-professions such as traders, wholesalers, and retailers filing ITR can apply
- The applicant must be a minimum of 23 years old at the time of application
- The applicant can be up to 65 years of age at the time of loan maturity.
Documents Required for OD Limit Against Property
The following documents are required to avail Overdraft facility against property
Mandatory Documents
- PAN card
- Loan application form
Identity Proof
- Aadhar Card
- Passport
- Voter ID
- Driving License
- Government Employee ID
- Government-issued photo ID
Address Proof
- Aadhar Card
- Driving License
- Voter ID
- Utility Bills
- Government Issued photo ID
- Government Employee ID
Date of Birth Proof
- Passport
- PAN Card
- Aadhar Card
- Birth Certificate
Signature Proof
- Passport
- PAN Card
- Verification by the banker
Income Proof
Self-employed Individuals and non-individuals
- Balance sheets
- Profit & Loss statements
Salaried Individuals
- Latest salary slip
- Form 16 or ITR (last 2 years)
Interest Rates and Other Charges
| Interest Rate | Starts from 10.10% p.a |
| Processing Fees | – Residential/Commercial Properties: Up to 1% of the loan amount + GST |
| – Other Properties: Up to 1.25% of the loan amount + GST | |
| Foreclosure Charges | 2% – 4% of the opening OD limit set for a year |
| No Due Certificate | Nil |
| Stamp Duty and Other Charges | As per the state laws |
Overdraft Limit Against Property vs Loan Against Property
Loan Against Property
- Credit Line: Full loan amount disbursed at once, suitable for significant expenses like overseas education.
- Security: Secured against a pledged asset, providing collateral for the sanctioned amount.
- Interest Rate: Lower interest rates due to the secure nature of the loan.
- Repayment Obligations: Follows a predetermined repayment schedule through regular Equated monthly instalments (EMIs).
- Interest Outflow: Interest paid on the entire disbursed loan amount.
OD Limit Against Property
- Credit Line: The loan amount can be accessed in parts, convenient for phased expenses in OD Limit Against Property.
- Security: Credit line linked to the collateral’s value, offering a secure option.
- Interest Rate: Although secured, a relatively higher interest rate reflects the flexibility provided in OD Limit Against Property..
- Repayment Obligations: Flexible repayment allows borrowers to deposit surplus cash anytime with no prepayment penalties in OD Limit Against Property..
- Interest Outflow: Interest is paid only on the utilised loan amount, not the entire credit limit at once.
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Frequently Asked Questions
1. What is an overdraft facility?
An overdraft facility is a short-term credit facility offered by financial institutions that allows borrowers to withdraw money from their current account or savings account even if the account holder has zero balance in the bank account.
2. What is the specified limit in the overdraft facility that is provided to the account holders every week?
As per the RBI guidelines, the specified limit in the overdraft facility provided by the banks to the account holders has increased from INR 50,000 to INR 1,00,000. This is not only for current accounts but also extended to overdraft accounts and cash credit.
3. What is the interest rate offered by HDFC Bank on overdraft against fixed deposits?
The interest rate offered by the bank on overdraft against fixed deposits starts from 7.15% for 2 years 11 months and 7.20% for a period of 4 years 7 months.
4. What is a personal loan overdraft facility?
A personal loan overdraft facility is a credit facility provided to pre-existing personal loan customers. The pre-existing customers can access funds as per the sanctioned credit limit.
