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Know About Overdraft
Welcome to our Article! Today, we're going to talk about something super useful for your business - the Overdraft Facility. Don't worry, we're keeping it simple and easy to understand.
CRDTLIN Capital gives you the power to take an OD Loan. It's a bit like asking for a little financial boost when you need it the most. Even if your Savings or Current Account is looking a bit slim, CRDTLIN Capital has got your back. They let you borrow money, making sure your business sails smoothly, no matter the waves of expenses that come your way.
How to Apply for Overdraft?
Approved Credit Limit
Nil Prepayment Charges
Repayment not in EMIs
Minimum Monthly Payment
Joint Borrowers Allowed
How does Overdraft (OD) work?
If your bank approves an overdraft for your account, it's like getting a loan from the bank. If you're already pre-approved for overdraft, whenever you need money, you can take it out even if your account has no balance. This is called going into overdraft. You can take out money up to a certain limit agreed upon with the bank. When you put money back into your account, the overdraft amount decreases.
While you have the overdraft, the bank charges you interest from the time you borrowed until you pay it back. You can repay the money to the bank whenever you want. After repaying, if you need more money, you can again go into overdraft until you reach the limit. When you use overdraft, the bank doesn't ask for any security.
However, if you use your assets, like your house, insurance policies, fixed deposits, shares, or bonds, as collateral, it becomes a secured overdraft. The interest rates and overdraft limits depend on the collateral. Interest is calculated daily because there's no fixed schedule for repaying the overdraft. You can repay the borrowed amount anytime without informing the bank.
Putting money into your account reduces your outstanding balance and the overdraft amount. So, the interest on the borrowed amount is calculated daily since it can change every day. Overdraft is a short-term credit facility, and it's good for managing temporary financial needs. Use it when necessary and repay quickly to avoid accumulating too much interest.
Types of Overdraft Facility
An overdraft is like a loan where the bank lets you withdraw more money than you have in your account. There are different types of overdrafts based on what you use as security.
Overdraft against Property
If you own a house, you can use it as security for an overdraft. The bank will check the value of your house before approving the overdraft. They might give you up to 40-50% of your property's value as an overdraft. Your credit history and ability to repay are also considered
Overdraft against Fixed Deposits
If you have money in Fixed Deposits (FDs), you can use them as collateral for an overdraft. It's easier and faster compared to using your house. You might get up to 75% of the FD amount as an overdraft. The interest rate is usually lower, around 2% more than what you earn from the FD.
Overdraft against Insurance Policy
You can use your insurance policy as collateral for an overdraft. The amount you get depends on the surrender value of your policy. You might get more money compared to using FDs as collateral.
Overdraft against Equity
Though not preferred, you can use your shares (equity) as collateral for an overdraft. The amount you get is less because the value of shares can change in the market.
Overdraft against Salary
If you have a salary account with a bank, you can get an overdraft against your salary. The limit might be 2-3 times your salary, depending on the bank. This is like a short-term loan, and the bank looks at your salary details to decide the limit.