New Delhi, June 16 -- You have taken a home loan and want to pay it off early. But when bonuses, business income or other windfalls arrive, you face a trade-off: use the money to reduce the loan or keep it available for emergencies and other needs.

A home loan overdraft (OD) account is designed to address that dilemma. It allows borrowers to park surplus funds against their home loan while retaining access to the money when needed. The catch is that OD loans typically carry a slightly higher interest rate than a regular home loan.

For borrowers who maintain sizeable savings balances, however, experts say the structure can still generate substantial savings despite the higher rate.

A home loan OD combines the features of a home loan and...