Overdraft
Overdraft
What is an overdraft?
Overdraft is a loan facility provided by commercial banks to customers and especially business community to overcome the day to day financial needs of the borrower.It is provided in the form of a credit limit over and above the credit balance available in the current account of the borrower.
The borrower in case of need utilises the credit limit for meeting his financial obligations.This is provided towards meeting working capital needs.
Working capital means funds required to meet expenses as mentioned below:
- Rent payable for the company
- Electricity charges
- Telephone expenses
- Printing charges, stationery charges etc
- Transport, conveyance etc
- Salaries payable to employees, wages payable to employees etc.,
The borrower may be a seller and there may be delay in getting the sale amount from his clients and in order to offset such delay in getting payment from the customers, the borrower requests the bank to provide overdraft facility and the limit is considered in months’ requirements. Say one month, two months or three months and this differs from one industry to another industry.
The borrower has to pay interest for the overdrawn amount each month
FAQ
An overdraft is a limit which is set up in customer’s current account for business purpose. The customer can withdraw money from the current account to the extent of limit sanctioned. Overdraft is an efficient form of borrowing, as interest will be levied only on the amount utilized for the corresponding period. It gives flexibility to the customers of depositing money into the account, to reduce the outstanding balance or draw more as per customer’s business needs. Interest is calculated daily on the fluctuating outstanding balance and is normally charged at the end of the month..
an Overdraft is an unsecured facility and thus there is no collateral requirement
MCLR stands for Marginal Cost of Funds based Lending Rate. MCLR is the benchmark rate below which the banks cannot provide loans to the customers who are availing loans linked to MCLR. This new benchmark rate is applicable for new loans sanctioned from April 1, 2016 onwards in terms of the guidelines provided by Reserve bank of India.
There is no foreclosure or pre-payment charges applicable under OD product and there is no commitment charges on limit utilization.
An overdraft will not hurt your credit score if you promptly pay any overdraft fees and cover the transaction that caused the overdraft. If you do not make payment to the merchant or payee, or fail to pay your overdraft fees to your financial institution, you can be referred to collections, which would damage your credit score.
No.
A loan is when you borrow a fixed amount of money for a fixed period of time. This is usually cheaper than an overdraft. If you have a regular, predictable income then a loan is often the recommended option.
If you don't know exactly how much you need to borrow or when you'll need it, an overdraft may be a better option. This allows you to borrow up to a certain amount without notice, and to make flexible repayments rather than being tied into a definite repayment schedule.
Overdrafts usually have a higher rate of interest than loans, but the cost can sometimes be reduced if they are secured against other assets such as property or cash deposits.
Features & Benfits Of Overdraft
Get loan upto 50 Lacs
depending upon the need
One Approval
One time approval for usage
Always Balanced
Pay for as much as you use
We only charge
2% processing fee
Eligibility For Overdraft Facility
- Minimum operational history of 2 years
- Promoter age >24 years
- 2 years ITR.
- VAT returns for the last 12 months
Required Documents For Overdraft Facility
- Business Registration Proof.
- KYC documents of the applicant and the organization.
- Bank statement for the last 6 months
- Pan Card of the promoter
- Aadhaar Card of the promoter