How Is Overdraft Availed?
You can apply for an overdraft through internet banking or you can visit the nearest branch for more details and how to go about it. It is often linked to your account.
What Are Overdraft Fees?
When you ask for an overdraft, you pay a fee or interest to the bank for the specific amount you want. It is like you pay interest on a house loan, but it is faster and you get it even if your account is in negative balance. It includes the processing fees and interest on the amount issued. The interest will continue to be the same for at least 12 months.
Eligibility
Salaried people, self-employed persons, and self-employed professionals can avail it. The age limit is 18 years to 58 years.
Types Of Overdrafts
• Authorized bank overdraft
• Unauthorized bank overdraft
Authorized By Bank
When a bank sanctions an overdraft on its terms and conditions, for a set period it is an authorized bank overdraft. The service fee will be charged by the bank. The interest levied will be charged on daily basis.
Unauthorized By Bank
When you don’t register for an overdraft through a bank and spend more than your available balance, it is an unauthorized bank overdraft. You will have to pay more in interest than that in a registered overdraft.
Types Of Overdraft Drawn
•Overdraft Against Property
You can avail of an overdraft against property or house even if you have a house loan making you eligible depending on conditions and checks by the bank. The limit is around 50% of the property’s value.
•Overdraft Against Salary
Salaried people can avail this banking provision against their monthly income if they have a salary account within the same bank. The limit is 2or3 times that of your monthly income.
•Overdraft Against Fixed Deposits
This provision is simple and quick if you don’t need a higher amount and you have a fixed deposit with the same bank. The interest is lower and the limit can be about 75% of your fixed deposit.
•Overdraft Against Insurance Policies
If you have one or more insurance policies, it is a great plus for availing of overdraft on it. The limit depends on the surrender value of the policy.
Advantages
There are a few advantages of an overdraft that can get you through an emergency situation. It prevents cheque bounces and on-time payment of loans and EMIs. It is a convenient mode of payment because you can do it anytime from anywhere provided you have registered for it.
What Happens When You Can’t Repay?
When you don’t repay your overdraft dues and bring it back to available funds in your account, the bank will close your account and send you a notice. If still, you didn’t pay up you will be sent to third-party collections that will affect your credit score.
Now we have learnt “How Many Times Can I Avail Overdraft On My Account?”, So overdraft given by a bank is a boon in emergencies but when not in control of your funds, it can backfire if you go on beyond permissible limits.
Q. How many times can I withdraw using overdraft?
Ans. As per RBI regulations, a limit of 1,00,000 per week is given so, in a day 2-3 times is allowed given the limit does not exceed in a given week.
Q. Can I withdraw cash using an overdraft?
Ans. Yes, you can withdraw cash unless it should exceed the limit set by the bank for a prescribed time and period.
Q. Can I extend my overdraft limit?
Ans. Yes, the overdraft limit can be extended. The bank will check your financials and then decide.
Q. Is overdraft available on all types of accounts?
Ans. Yes, this provision is available on current, savings, deposit, and salary types of accounts.
Q. How is the limit for an overdraft calculated by banks?
Ans. It depends on your financials, age, eligibility, defaults, years of relation with banks, account balance, and much more.
Q. What span of time does the bank give for repayment?
Ans. The time span is set by the bank. Usually, it is 12 months or lesser, subject to the bank.
Q. What is the difference between overdraft and term loans?
Ans. An overdraft can be applied for a short-term span and interest calculated daily on the used fund whereas a term loan is for a longer span of time for a fixed amount and fixed interest.
Q. Is an overdraft provision available at any financial institution?
Ans. The overdraft provision is only available in banks.
