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Personal Overdraft - Know Everything About It

· Personal Loan Advice

To understand the concept better let me explain it with an example. Consider you have to put your car for a repair. You have set aside Rs. 20,000 for the repairs. However, you need to keep additional funds for a just in case scenario. You may prefer borrowing from a friend or loved one so if you do not need the additional money you can just return it back without any interest. Likewise, Personal Overdraft is that facility that promises to provide you the additional fund if you require it. It is an account that you open to help you keep a certain amount of money separately from the total funds already present. You can withdraw the money whenever you need to. Simply, it can be an extension applied to your daily account using which you can access additional funds than the amount available in your account. This additional money remains in your account and you are not charged interest for it until you use it.

Understanding the Features of an overdraft facility:

Lower rate of interest

Credit cards go heavy on your pockets because of their high-interest rates. This is not the case with personal overdraft. An Overdraft facility gives you the benefit not only of a lower interest rate but also, paying interest only on the amount you use.

Easy Disbursal

In the case of overdrafts, the money is available in your account for use within a few working days. In Addition, unlike any other loan, it does not require a very lengthy process and stringent verifications.

No limit on withdrawals

Unlike other debt products, in personal overdrafts, you can have the funds as long as the loan tenure even if the amount is not in use. This facility provides higher withdrawal options at nominal interest rates. You can also extend your limit of the amount as well as your loan tenure.

No Concept of EMIs

The most salient feature of an overdraft is that it is like a No EMI loan which lends you money and you just have to pay interest for the additional amount of money that you’ve withdrawn from your account. You can pay the entire amount in one go whenever you have the money to do so.

No Impact on CIBIL score

Since, in overdraft, you do not use the additional money until you are in need, the credit score remains intact as there is a chance of defaulting on EMIs due.

Flexibility in servicing

In any other personal loan, you are required to pay the borrowed funds in the form of an EMI. These are calculated on a monthly basis, making the borrower liable to pay off in a disciplined manner. However, Overdraft provides you flexibility since you just have to pay the interest calculated on the additionally used amount. You can pay the principal amount whenever you have it with you. You may pay a partial amount all depending on your liquidity. This makes the loan facility more affordable.
 

Minimal documentations

Most personal loan products today are easily available online. Overdraft facility too, is easily available at minimal amounts of paperwork.

Overdraft facility and personal loan is a good option as compared to credit cards. It is more affordable and convenient for easy access to funds.