Overdraft (OD) facility is a type of loan in which people can borrow more than the money available in their bank account. This facility is very useful in financial emergency.
Overdraft Facility: Generally people know that we can withdraw only as much money as is in the account from our bank account. But do you know that banks or non-banking financial companies (NBFCs) provide a special facility to their customers, in which customers can withdraw more money even if they have less money in the bank. This is called Overdraft Facility. We tell you what this overdraft facility is and how you will get it.
What is Overdraft Facility?
Overdraft facility is available in both government and private banks. Overdraft is linked to the customer’s savings or current account. What will be the limit of overdraft you get, it is decided by the banks or NBFCs. That is, this limit may differ in different banks and NBFCs. In this, the amount you withdraw has to be repaid within a fixed period and interest is also charged on it. Interest is calculated on daily basis.
How is eligibility determined?
- The borrower should be a citizen of India.
- The age of the borrower should be between 21 to 65 years.
- To avail overdraft facility, your CIBIL score should be good.
- Some banks provide this facility to customers pre-approved, while some customers have to apply separately for it.
- In this, something is pledged as security, like FD, shares, house, salary, insurance policy etc.
- Before applying for overdraft facility, be sure to know about the processing fees. Some banks also charge processing fees for this service.
Benefit of overdraft?
In case of credit card or other personal loan, it is quite cheap. In this you have to pay less interest. The second advantage is that in overdraft, you have to pay interest only for the period for which you borrow money.