Up to an authorized limit, an Overdraft Loans is a type of financial instrument that banks and other financial institutions provide that enables account holders to take out more money than is available in their checking account. Before choosing one, it’s important to comprehend how this short-term credit facility operates, as well as its benefits and drawbacks. It can assist both individuals and enterprises in managing cash flow gaps.
What is an Overdraft Loans Account?
Let’s examine the definition of an overdraft loan account in more detail. Banking institutions offer a feature called an OD loan account that lets you access funds even if you have no money in it. In this case, lending organizations are giving you credit or a loan, and you are officially a borrower. There are some fees associated with the service, even though it does provide you with a safety net against unforeseen expenses and crises.
Interest on the loan can rack up rapidly if it is not properly managed, and you can be required to pay penalties. Therefore, before using the service, spend some time learning about the costs and payback terms. In this manner, you may minimize any potential drawbacks and yet reap the benefits of this financial tool.
Features of Personal Loan Overdraft Facility
- Simple documentation: Our overdraft facility documentation is made simpler at Tata Capital. This greatly simplifies the application procedure.
- Easy repayment options: You only pay interest on the amount you use when you take up a personal loan with an overdraft facility from Tata Capital. Additionally, we provide a part-payment option at no additional cost.
- Credit limits: You can use the predefined credit limitations that come with overdraft facility accounts. These boundaries rely on a variety of personal characteristics. For paid personnel, for instance, the Overdraft Facility limit may be determined by factors such as age, creditworthiness, and financial health.
- Convenient tenures: At Tata Capital, we provide fixed hybrid personal loan overdraft facilities with tenures ranging from 36 months to 84 months. Additionally, the dropline overdraft facility duration is predetermined, as is the time frame for which your credit limit stays fixed.
- Avail of high loan amounts: The capacity to receive large amounts of money is a highly helpful feature of overdraft facility accounts. This can be helpful for a variety of reasons, including growing your company or taking care of any pressing personal issues. Loan amounts from Tata Capital range from Rs. 2 lakhs to Rs. 35 lakhs.
Types of Personal Loan OD Facility
- In Step Up (Hybrid), the limit would stay set for a predetermined amount of time before switching to a dropline based on a predetermined % for the remainder of the tenure.
- The limit for loans with 60 and 72-month terms will stay the same for the first year, and the dropdown menu will begin after that.
- The limit for an 84-month loan will stay the same for the first two years, and the dropdown menu will begin when those two years are over.
- The dropline begins immediately and has no set duration for loan tenures shorter than 60 months.
Eligibility Criteria for Personal Loan Overdraft
- Only those who are salaried may apply.
- The candidate must be between 21 and 58 years old.
- A credit score of 725 or higher is required of the applicant.
Documents Required
- Salary Slips
- Income Proof
- Address Proof
- Photo Identity Proof
- Employment Certificate
Personal Loan Overdraft fees
| Fees | Details |
| Interest Rate | For overdrafts on personal loans, Tata Capital provides competitive interest rates. |
| Processing Fees | The fees associated with processing an application for a loan overdraft are referred to here. |
| Payment Instrument Swapping Charges | If the borrower wants to exchange their mandate or postdated check from another account for EMI installments, fees will be assessed. |
| Foreclosure Charges | This fee is assessed if the borrower wants to pay back the total amount of the outstanding loan overdraft before the planned term expires. |
| Stamp Duty | This charge depends on the state in which you’re applying for a loan overdraft. |
| Cheque Bounce Charges | This is charged in case the borrower’s cheque bounces. |
How Does an Overdraft Facility Work?
- Credit Limit: Based on your creditworthiness and banking history, the lender establishes a maximum limit when you are granted an overdraft. For example, even if your balance is nil, you can withdraw up to your limit of INR 30,000.
- Interest Charges: Only the amount you overdraw, not the entire limit, is subject to interest charges. Interest is assessed on the INR 10,000 if you spend INR 10,000 of your INR 30,000 limit. Typically, this interest is computed every day and paid out once a month.
- Repayment Flexibility: There are no set monthly payments, in contrast to conventional loans. The overdraft loan is flexible in that you can pay it back whenever it’s convenient for you. For instance, you can pay back the INR 5,000 you overdrew today when you have more money.
- Fees and Penalties: Although they provide flexibility, overdrafts have costs, particularly if they are used more than the predetermined limit. Higher fees are frequently associated with unauthorized overdrafts.
Conclusion
Overdraft loans offer simplicity and large loan amounts, making them a versatile financial instrument for handling cash flow shortages. To prevent unforeseen financial problems, it is essential to comprehend the related expenses, such as interest, fees, and penalties. You can maximize the advantages and minimize the disadvantages with careful management.