Keep more than a break-even amount in it: money in the loan saves its rate tax-free while an FD is taxed, but the overdraft costs a little more on the whole loan. Won’t need the money for years? Prepaying a regular loan saves a bit more.
How it works
An overdraft home loan (SBI MaxGain) or a linked-account home loan (Baroda Max Savings) charges interest only on the loan minus the money you keep in it. The money stays yours: you can take it out under your bank’s rules.
- Interest saved at 8.00%, tax-free
- ₹80,000
- Extra 0.50% on the whole loan
- −₹25,000
- FD interest after tax (6.25% becomes 4.30%)
- −₹43,000
- Better off, a year
- ₹12,000
Money in the loan works like an FD paying 11.63% before tax. It pays once you keep more than ₹6.8 lakh in it (13.5% of the loan). An example at today’s rates, not a quote.
| Product | Rate against the regular home loan |
|---|---|
| SBI MaxGain | Rate against the regular home loan 0.50% more |
| Baroda Max Savings, up to ₹75 lakh | Rate against the regular home loan Same rate |
| Baroda Max Savings, above ₹75 lakh | Rate against the regular home loan 0.25% more |
Prepay, or keep it in the overdraft?
- Prepay a regular loan at 7.50%
- ₹75,000 saved · the money is gone
- Keep it in SBI MaxGain
- ₹55,000 saved · you can take it back
- Put it in an FD
- ₹43,000 after tax
Prepaying saves ₹20,000 more because MaxGain’s extra 0.50% is charged on the rest of the loan. That is the price of keeping the money yours. Already on MaxGain? Money kept in it saves exactly what prepaying would. An example, not a quote.
When a regular loan is better
- You can keep less than the break-even amount in it.
- You would end up spending the money: it is as easy to take out as a savings account.
- Old tax regime, smaller loan: paying less interest can mean losing part of the ₹2 lakh interest deduction (Income-tax Act, 2025, section 22; earlier section 24(b)). The check counts this.
- Money kept in the loan is not a repayment, so it is not principal for the old regime’s deduction (section 123; earlier 80C).
Sources
Last checked 4 Nov 2026 · by BachatLab