To put it merely, in overdraft facility in case you have an permitted credit score restrict of ₹ 1,00,000 and also you want to use solely Rs 30,000, you withdraw Rs 30,000 and pay curiosity on month-to-month foundation solely on the withdrawn quantity.
➡️Generally the Rate of Interest in OD is 1%-2% increased than Personal mortgage, however shall be charged solely on the withdrawn quantity. So it might develop into considerably decrease if you happen to utilise solely the mandatory required quantity.
🔸An overdraft facility in financial institution accounts is sort of a pre-approved mortgage. The financial institution ascertains a selected restrict as much as which you’ll be able to overdraw in your account steadiness.
🔸The financial institution costs curiosity solely on the quantity utilized by you and just for the time it’s borrowed. It is calculated every day and billed to you each month.
🔸You will pay again the quantity as and when you have got the funds, as a lump sum or in part-payment, and there’s no prepayment penalty or EMI idea like in loans.
Difference between Overdraft and Personal Loan Account.
🔺A private mortgage is a mortgage, however an overdraft account is a line of credit score. Hence, essentially the most important distinction is the phrases of compensation. An overdraft would not contain EMls or have foreclosures costs like a private mortgage and is extra versatile.
🔺The curiosity in a private mortgage is charged on your complete mortgage quantity, however solely the quantity truly overdrawn is charged in an overdraft account.
Source: Groww, loantap
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