1) What is an Overdraft loan?

An overdraft loan is borrowing some amount of money when the applicant has zero balance in their account. An overdraft loan has an interest in the loan and fee per overdraft as well. Overdraft is said, taking or borrowing a huge amount of money from the bank, then in the applicant’s account. There is an overdraft limit, which is an understanding between the borrower and the bank by setting a limit for the amount to be borrowed.

2) What is the eligibility of an overdraft loan?

The eligibility for an overdraft loan varies from bank to bank and lender to lender. The common features include, age of the applicant must be in between 21 to 65 years. Applicants should have an account in the bank, where they want to take the overdraft loan, by submitting the bank statements. The income of the applicant and a good credit score will be a plus.

3) Documents required for overdraft loan?

The documents required to get an overdraft loan are Identity proof like Passport or Aadhar card or voter id or PAN card. Address proof like passport or PAN card, Age proof like driving license or Voter id. An application form requesting for the overdraft loan, and passport size photos.
The documents required for overdraft loans are less when compared to other loans and the documents required to depend on the bank from which the loan is taken.

4) Benefits of overdraft loan?

An overdraft loan, in other terms, is called a short-term loan. Which is a loan for smaller amounts. An overdraft loan has few advantages like, the availability of money when required for the needs, there would be no penalty if the overdraft loan is paid early than determined, an overdraft loan is flexible as we take only what we need, an overdraft loan has less paperwork.

5) How to get an overdraft loan?

An overdraft loan can be obtained, when the applicant has their salary account in the respective bank and the applicant can get a limit of overdraft up to 3 times their salary. Typically the overdraft loan features vary from bank to bank.

6) How to repay an overdraft loan?

An overdraft loan can be repaid by, paying the amount when available or by setting a statement saying to take from the bank monthly as salary credits, or by paying the total amount of loan when possible and there is no fee when paying all at once.

7) What are the types of overdraft loans?

There are two types of overdraft loans, they are secured and unsecured overdraft loans. Secured overdraft loans are taken against the applicant’s bank current account, which requires collateral for the loan. Unsecured overdraft loans are that doesn’t have any collateral or security for the loan.

8) What are the disadvantages of the overdraft loan?

When compared to personal loans, the amount taken on overdraft loans is less.
The interest rates, fees, charges are high for overdraft loans.
The interest will change based on the policy of the bank, which leads to a risk for the applicants in paying the loan and its interest.
Once the limit for the overdraft loan exceeds, then it will be expensive in paying the loan borrowed and the interest for the loan.
If the overdraft loan can’t be paid, then the collateral is seized by the bank in case it is a secured loan, or if it is an unsecured loan, then the bank account will be closed and it will affect the credit score of the applicant.

9) What is the interest rate on the overdraft loan?

The interest rates of overdraft loans vary from bank to bank. The interest for an overdraft loan can be fixed earlier with the bank by setting a limit for it or else can be taken when required and needs to pay the interest for the loan obtained.