State Bank of India (SBI) gives its customers a special facility, through which you can only withdraw the balance contained in your bank account. Let’s know what is an overdraft facility and you can take advantage of it …
New Delhi. State Bank of India (SBI) gives its customers a special facility, through which you can only withdraw the balance contained in your bank account. This facility of the bank is known as Overdraft Facility. Let’s know what is an overdraft facility and you can take advantage of it …
What is an overdraft facility?
An overdraft is a type of loan. Due to this, customers can withdraw more money from their bank account than the existing balance. This extra money has to be repaid within a certain period of time and it also attracts interest. Interest is calculated on a daily basis. Overdraft facility can be given by any bank or non-banking financial company (NBFC). Banks or NBFCs decide what will be the limit of overdraft you get.
This is how you can apply
Banks offer preapproved overdraft facility to some of their customers. At the same time, some customers have to get separate approval for this. For this, apply in writing or through internet banking. Some banks also charge processing fees for this facility. There are two types of overdrafts – one secured, the other unsecured. Secured overdraft is that for which some pledge is kept as security.
You can get an overdraft on things like FD, shares, house, salary, insurance policy, bonds etc. Can. It is also called taking loans on FD or shares in easy language. In doing so, these things are mortgaged to banks or NBFCs in a way. If you do not have anything to offer as security, you can still take an overdraft facility. This is called unsecured overdraft. Withdraw from credit card as an example.
Get this benefit
When you take a loan, there is a fixed period for repaying it. If a loan is repaid before the term, then it has to pay a prepayment charge but this is not the case with an overdraft. You can pay money even before the stipulated period without paying any charge. Along with this, the interest has to be paid only for as long as the overdraft amount remained with you. Apart from this, you do not have the obligation to pay money in EMI. You can repay the money anytime within the stipulated period. Due to these things, it is cheaper and easier than taking a loan.
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Keep this in mind
If you are unable to repay the overdraft, then it will be repaid by the things you have pledged. But if the overdraft amount is more than the value of the mortgaged items, then you have to pay the rest of the money.