Overdraft Facility

How Does a Personal Loan Overdraft Facility Work

Personal loan overdraft facility allows you to withdraw funds whenever you need and is linked to your savings/current account. Usually, the lending bank sanctions a loan limit in the form of overdraft and not as a lump sum amount in the borrower’s bank account.

Know How It Works

• Based on your eligibility and financial requirements, you apply for a personal loan overdraft from the respective lending institution.
• You can withdraw funds from the sanctioned limit assigned over and above your bank balance.
• The amount you overdraw can be used to meet urgent cash requirements and the interest rate is charged only on the utilized amount and not from the total assigned overdraft limit. You can even overdraw multiple times from the total OD limit.

Features of Personal Loan Overdraft

Personal loan overdraft is a flexible credit product that comes with no end-use restriction besides speculation at your disposal to meet your financial requirements. Find below the key features of personal loan overdraft facility:

• Loan Type: Overdraft facility
• Credit Limit: Based on your income, credit profile, employment stability and relationship with the lending bank
• Usage: Can withdraw funds multiple times for the assigned amount limit
• Interest rate: Charged only on the utilized amount from the total sanctioned limit
• Repayment tenure: Usually 12 months and may be renewed annually
• Pre-payment/Foreclosure Charges: Nil Flexible repayment structure with no fixed EMIs

Eligibility Criteria

The eligibility criteria of regular personal loan and a personal loan overdraft are almost similar. Find below the basic eligibility criteria for availing a personal loan overdraft facility set by most banks and NBFCs:

• Age Requirement: 21 - 65 years (varies as per lender)
• Employment Type: Salaried Individuals and self-employed professionals and non-professionals, and central/state/local government employees.
• Income: Stable and regular source of income with a minimum monthly salary requirement as set by the lender.
• Credit Score: Ideally, 750 or above preferred by most banks
• Bank Account: Applicant should have an existing bank account with the lending bank