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        From Founder's Desk
        29 April 2026
      
    
  

  
  
    Product Strategy · Expert Insight
    

# SBI Maxgain vs Home Loan Overdraft: Why Liquidity is King

  

  
    ![Mangesh Zope](../../assets/founder.jpeg)
    
      

Mangesh Zope

      

Founder, Peaceful Loans · IIM Calcutta Alumnus

    
  

  
  
    

There is a professional bias called the **"curse of knowledge"**. It's a professional bias that builds over time if you continue to work in the same industry. It's a cognitive bias in which someone who knows something well finds it difficult to imagine what it's like for others who lack that knowledge.

    

Once you've internalised expertise, you unconsciously assume that what's obvious to you must be obvious to everyone else.

    

When I started my career at Pepsi, I didn't know how the two-way supply chain of glass bottles worked. Once I learned it, anyone who didn't know this became a startling fact for me.

    

The same pattern is repeating in the home loan industry for me. I speak to 4-5 borrowers a day, and I get very surprised that the **home loan overdraft product** is not understood.

    

## What is it?

    

It is a product where your home loan account is linked to a savings account or an overdraft account. Assume your total home loan is ₹1 cr. If you keep, say, ₹20 lakh in the OD account, then you are charged interest **only on ₹80 lakh** (₹1 cr - 20 lakh).

    

## How is that different from pre-payment?

    

What it essentially does is you will end up saving interest on that ₹20 lakh at the same rate as the home loan interest rate, which could be 7.5% - 7.7%.

    

It is a **pseudo savings or earnings**, like a piggy bank. And the best part? **It is not taxable.**

    

A lot of people have seen their tenure reduced drastically owing to using an OD home loan. But it's not just about the OD home loan being used to reduce the tenure or the total amount of interest. 

    

## The Power of Liquidity

    

It is also about the fact that **you don't lose your liquidity.**

    

I have heard so many consumers complain about the fact that when the market is ripe—say, when the Iran war erupted and the market dropped 20-30%—they had no liquidity to invest because they had prepaid their home loans. They regret that such opportunities don't come again and again.

    

Maybe, in their building, somebody is financially distressed and selling a fancy apartment at 10-20-30% lower price than normal times. You need an immediate down payment to secure that opportunity. In such events, you are not able to access those opportunities unless you have this sort of liquidity available.

    

## How much do they cost?

    

These OD home loans typically come at a **0.25% higher interest rate** than a normal home loan.

    

However, that extra 0.25% is usually offset if you keep just 3% of your home loan outstanding amount available in the OD balance.

    

Considering people keep 6 months of emergency funds in liquid assets like savings banks or liquid funds, that money is used **so much more superiorly** by keeping it in the OD account.

    

Worth giving it a shot. If you want to understand this product further in depth, watch our video on this topic below.

    
      
    

    

Please reach out in case any of you have questions around this product.

  

  
  
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