Should you prepay your home loan if you have extra cash in hand?

A home loan overdraft is the same as the overdraft limit on the current or savings account where the borrowers can deposit an advance or extra funds. In the case of a home loan overdraft, the borrowers’ account is linked to a dedicated savings account by the lender. So, when a borrower adds the surplus money to the account, it will be considered pre-payment towards the loan, thus reducing the interest on the outstanding loan amount. In a way, it effectively brings down the overall liability as the interest is only being charged on the outstanding balance.

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