Overdraft Loan
Document Criteria
Note : Any additional documents specified by the Bank or NBFC.
Features and Benefits
- Authorized credit limit: The overdraft facility is granted over a predetermined limit. This limit can be different for each borrower
- Interest rate: The interest rate is charged on the amount of money drawn down. It is calculated daily and charged to the account at the end of the month. If you do not pay the overdraft on time, the interest amount will be added to the principal amount at the end of the month and interest will then be calculated on the new principal amount
- No fees for early repayment: If you wish to repay a loan early, an early repayment fee is normally charged. However, this is not the case with an overdraft facility. If you repay the amount borrowed through the overdraft, there is no early repayment fee. In addition, you do not have to repay the overdraft amount in installments. You can repay the borrowed amount cumulatively.
FAQs:
Almost every public or private bank in India offers overdraft facility to its customers. However, the minimum and maximum loan amount, interest rate and repayment period fixed by the banks may vary and depend on the applicant’s profile, financial history and repayment capacity.
Yes, an overdraft is a credit facility that allows borrowers to use money in parts of the total approved limit.
If you are unable to pay the outstanding overdraft amount, the bank has the right to deduct the amount from your existing savings or current account.
The duration of a bank account overdraft is determined by the bank itself and depends on the borrower’s relationship with the bank in question.
An overdraft is the same as a bank account that can have a negative balance up to the authorized overdraft limit. Example: If your bank account has a balance of Rs. 10 lakh and you withdraw Rs. 12 lakh for business purposes, an overdraft is a demand loan for the additional Rs. 2 lakh. If you withdraw Rs. 12 lakh from your bank account, the balance will be zero and even negative beyond that. Banks charge an interest rate on an additional amount borrowed of Rs. 2 lakh.
An overdraft facility can be offered by most of the financial institutions. Some of the leading banks are SBI, HDFC Bank, Axis Bank, ICICI Bank, Punjab National Bank etc.
