Overdraft Facility is a financial instrument in which you can withdraw money from your savings or current account, even if your account balance is zero. This feature is provided by almost every financial institution, including banks and NBFCs.

Overdraft facility a type of short-term loan to be repaid in defined tenure as required by the financial institutions. Lenders shall levy interest rate that the borrower needs to repay, as per the bank’s terms and conditions. The type of interest rate offered by lender is fixed and not floating.

Features & Benefits &:

• 1) Approved Credit Limit: Overdraft is awarded over a predetermined limit. This limit can be different for each borrower
• 2) Interest Rate: Interest rate is charged on the amount of overdraft used. It is calculated on daily basis and it is billed to the account at month-end. If you default on paying the overdraft as per set schedule, the interest amount will be added to the principal amount at month-end and then interest will be calculated on new principal
• 3) Nil prepayment charges: Whenever you want to prepay a loan, usually a prepayment charge is levied. However, this is not the case with the overdraft facility. When you repay the amount borrowed through overdraft you do not pay prepayment charges. Also you need not repay the Overdraft amount in EMIs. You can repay the borrowed amount cumulatively
• 5) Repayment is not done through EMIs: Repay the overdraft whenever you have the money. You do not have to repay the overdraft amount like you repay a loan. You do not have to repay in Equated Monthly Instalments (EMIs). You can repay whatever amount you like whenever you like. However, if the lender demands a repayment, then you will have to fulfil that demand
• 6) Minimum Monthly Payment: Overdraft has no minimum monthly repayment however the amount you owe should be in the overdraft limit. You should not delay overdraft repayment for long, as it affects your credit score
• 7) Joint borrowers are allowed on Overdraft: If you take an overdraft jointly then you and your joint applicant are both, in effect, responsible for the entire debt. Irrespective of the proportion of overdraft borrowed, both the applicants are responsible for the timely repayment of the overdraft. This means that if one of the borrowers is unable to pay/defaults, then the other borrower has to pay the entire amount. In such a case, irrespective of overdraft proportion of joint borrowers, all collaterals of each of the borrower are at stake if default occurs
• 8) Workings: Please note that your account may not automatically go into overdraft when you write a cheque. There are chances that your cheque is dishonoured instead of going into overdraft and then a dishonour charge may be levied on your account

• 1) Sole proprietorships
• 2) Self employed Professionals
• 3) Partnerships Firm
• 4) Private Limited Companies
• 5) Limited Companies