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Personal Finance Overdraft Facility: Most people adopt the route of personal loan to meet their financial needs. Which is an easy and fast loan process. However, its interest rates are higher. But do you know that if you have immediate or short-term need of money, then apart from personal loan, you can also choose the option of overdraft. Let us know what is overdraft facility…
Facility to withdraw more money
Banks provide overdraft facility to their customers. In which the bank lends a certain amount to the customer based on the transactions in the customer's account. This is called overdraft. Whose interest rates are fixed. Depending on the relationship with the bank, overdraft facility is provided even if the account holder has zero balance. The amount can be withdrawn in lump sum or in installments within the prescribed limit.
How to take advantage?
Overdraft facility can be availed even if there is zero balance in the account. The bank sets certain limits based on your credit and relationship with the bank as well as the transactions on your account. Offer you a credit line under this limit. You can get credit limit at the interest rate fixed by the bank. Interest rates are higher than personal loans. But in secured overdraft you can borrow at a lower rate. For example, the bank may charge you Rs. Can charge Rs. Overdraft facility is provided with a limit of Rs 5 lakh. So you can take a specific amount or a lump sum overdraft within that limit.
More attractive than personal loan
Many types of documents have to be submitted in personal loan. Whereas overdraft facility can be availed by filling a form. In personal loan, a fixed EMI has to be paid every month. Whereas after availing the overdraft facility, you can deposit the amount in lump sum at any time as per your wish or as per your capacity. There is no fixed period of payment. Interest is applicable only on the amount withdrawn under overdraft facility. Therefore the interest burden remains light.
For example, under an overdraft facility of Rs. Rupee. Out of Rs 5 lakh. First 1 lakh, then after 3 months 50000 and after 5 months 3.50 lakh, then for the first 3 months Rs. Interest will be calculated on Rs 1 lakh, later interest will be calculated on Rs 1.50 lakh. And after five months interest will be calculated on Rs 5 lakh.