How does an overdraft work?An overdraft is like a stand-by line of credit that allows you to access additional funds when needed. You can access these extra funds up to an approved limit. So, for example, if you have an overdraft of Rs. 30,000 in place, you can then have access to up to Rs. 30,000, even if you do not have funds in your current account. What’s more, you only pay interest on the amount you use and you can reimburse the amount used at your convenience.
What is the difference between a loan and an overdraft?
The main difference lies in the repayment. If you want to have control over your monthly budget, a personal loan is more suitable as your repayments are spread over the duration of your borrowing in equal monthly instalments. With an overdraft, you have the flexibility to repay the borrowed amount at your convenience. You can redraw the repaid amount whenever you need it and once you are fully paid up, you can conveniently access these funds again at any time.