8 Smart Things to Know About Personal Loan Overdraft Facility
A personal loan overdraft facility is an unsecured credit facility that is offered by many banks and financial institutions. Using a personal overdraft facility, you can choose to borrow only as much as you require from the sanctioned loan amount. You can repay your personal loan overdraft at your convenience.
To help you understand the concept of a personal loan overdraft facility a little bit better, let’s take a look at an example. Let’s assume that you’re planning to renovate your house, for which you need some funds. However, you’re unsure of the total expenses. If you were to take a personal loan of ₹10 Lakhs, you’d have to pay back this amount with interest, regardless of whether or not you end up using the entirety of this amount on your home renovation.
At a time like this, a personal loan overdraft can be a great option as you can choose to borrow as much or as little as you need from the sanctioned amount and only repay what you’ve borrowed. With a personal loan overdraft, you can withdraw as and when you need to meet your financial obligations.
Here are five smart things that you should know about a personal loan overdraft to help you make the most of your finances:
You can make multiple withdrawals to meet your financial needs with a personal loan overdraft facility. Generally, there are no fees or charges associated with making multiple withdrawals as long as you’re making the withdrawals during the draw period and your withdrawals are within the sanctioned limits.
Collateral-free Loan Facility
Much like any other personal loan facility, a personal loan overdraft is an unsecured credit facility that does not require you to offer up any security or collateral. Here, the facility comes with lower personal loan interest rates. However, some banks and financial institutions do offer secured overdraft facilities. Typically secured overdraft facilities offer lower interest rates. Here are some securities that are accepted as collateral – house or property, fixed deposits, life insurance policies, equity holdings, and your salary.
Flexible Repayment Options
With a personal loan overdraft facility, you needn’t pay fixed monthly payments, instead, you can make flexible repayments at your convenience throughout the loan tenure.
Only Pay for What you Borrow
Let’s assume your sanctioned amount is ₹10 Lakhs. However, at the end of your draw period, you’ve only withdrawn a total of ₹5 Lakhs. In such a scenario, you only need to repay your borrowed amount of ₹5 Lakhs. This can help you cut costs and pay less in interest if you’re unsure of how much money you need to borrow.
Provided that all your documents are in order and you have a satisfactory credit score, a personal loan overdraft facility is approved and processed rather quickly. This means that a personal loan overdraft facility is ideal for meeting any immediate financial needs.
Having a Credit History Helps
Often, banks offer personal loan overdraft services to existing customers who have a track record of repaying their dues on time. Having a good credit history will also ensure that you get better terms in terms of the rate of interest and repayment.
Helps Reduce Interest Payments
A personal loan credit facility is a great option for you if you’re looking for low-cost credit facilities. With a personal overdraft, you only need to pay interest on how much you borrow. Moreover, since you’re only charged the interest till the time you repay your borrowed amount, you can bring down interest payments by repaying quickly and often.
No Foreclosure Charges
Another added benefit of a personal loan overdraft facility is that you can choose to repay your loan amount whenever you want to, without having to pay any foreclosure charges.
A personal overdraft loan facility is a great option when you’re unsure of how much funds you require to meet your financial obligations. This is because, with a personal loan overdraft facility, you only need to repay how much you’ve borrowed. This can help you bring down repayment costs significantly while also offering you the flexibility to borrow more if you need funds. Maintaining an overdraft facility can also help you meet any urgent short-term financial needs without having to apply for a personal loan.