Roxyment Corporate Advisory Pvt. Ltd.
OVERDRAFT LIMIT
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An overdraft limit is a predetermined amount of money that a bank or financial institution allows you to withdraw from your account, even if you don’t have enough funds in the account to cover the withdrawal. In other words, it is a form of credit that is linked to your bank account.
When you use an overdraft facility, you are essentially borrowing money from the bank. You will be charged interest on the amount you borrow, and sometimes additional fees may apply. The interest rate and fees will vary depending on the bank and the terms of your account.
ABOUT OverDraft Limit
Overdrafts are typically associated with checking accounts and are often used to cover unexpected expenses or to help manage cash flow.
There are two types of overdrafts: arranged and unarranged. An arranged overdraft is pre-approved by the bank and has a set limit and interest rate, while an unarranged overdraft occurs when an account holder exceeds their available balance without prior authorization, resulting in potentially higher fees and interest rates.
Features Of OverDraft Facility
- Approved Credit Limit: Overdraft is awarded over a predetermined limit. This limit can be different for each borrower
- 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
- 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
- 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
- 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
- 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
- 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
Document List for Overdraft Limits
Home Loan is extended for the purpose of
1. Purchase of land and construction of a residential property
2. Purchase of New Flat / House
3. Purchase of old house / flat along with undivided share of land
4. Extension/modification of existing house / flat
5. Balance takeover from banks/HFC
6. Home Loans at the sole discretion of Banks/NBFCs/MNC Banks
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