instant money When needed, we all rush to take a personal loan. Banks charge a hefty interest on personal loans. However, apart from personal loans, there are many cheaper options available in the market, which include gold loan and overdraft facility. You can easily avail overdraft facility from the bank. Let us know how the bank will solve your cash problem through overdraft?
What is overdraft facility?
Every government and private bank provides overdraft facility. Most banks provide overdraft facility on current, salary and fixed deposits so that customers can use cash whenever required. In a way, it is a loan which is available from the bank in which you have your account. Many banks also provide overdraft facility to their account holders against shares, bonds and insurance policies. With the overdraft facility, you can take money from the bank when needed and return it later.
How can you avail overdraft benefit?
Every bank or NBFC provides this facility to the customers according to its own rules. Some customers get the overdraft facility in advance and some have to get approval from the bank later. Customers can apply for this facility online or by visiting the bank in person. Some banks also charge processing fees from the customers initially according to their rules.
Two types of overdraft facilities are provided to the customers. First is secured and second is unsecured facility. As the name suggests, secured facility means that before taking money as security, one can avail overdraft facility from the bank by pledging shares, bonds, FD, house, insurance policy, salary or by keeping it as collateral. In a way, this facility can also be considered as taking a loan from the bank against FD or shares.
If we talk about unsecured facility, then it is taken when you do not have anything to pledge and you need money. In such a situation, money can be taken from the bank without security which can also be called withdrawal of money from credit card.
How much amount can I take?
Every bank gives money according to its own rules which completely depends on what collateral you have pledged with the bank. Most banks give more money for overdraft facility against salary and FD and also keep a higher limit. If your payment history is good then banks give overdraft facility up to 200 percent of your salary. Otherwise, generally banks give overdraft only up to 50 percent of the salary.
Who can avail overdraft facility?
Anyone who already has a salary, current or FD account in the bank can easily get this facility from the banks. The bank gives money on the basis of the account history and value of its customers. Along with this, the customer’s credit, payment history, CIBIL score, everything is taken into consideration.
Benefits of overdraft facility?
According to banks, taking money through overdraft is cheaper than any credit card or personal loan. In overdraft, you have to pay less interest as compared to other loans. Also, you have to pay interest on the money taken only for the period for which you take the money. Customers with salary account get overdraft of half of their salary or up to 3 times their salary. If you take a personal loan, then along with higher interest, you also have to pay penalty for repaying the amount early. But in overdraft, you have to pay interest only for the period for which the money is taken.
It has been observed that if the customer has a good payment history, then the banks already offer overdraft to their customers which makes it easier for them to take a loan from the bank.
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