Top Reasons to Choose Salary Overdraft

Bank overdraft on your salary account is a unique credit solution, perfect for flexible and affordable credit seeking individuals looking for a quick personal loan. An overdraft means that you can withdraw and repay funds at your convenience. Like any typical credit facility, you have to pay interest on the amount utilized. You can also repay part of the outstanding amount whenever you have surplus funds and withdraw whenever you need.

*What is Overdraft?

Under the salary overdraft facility, banks extend a credit limit based on the take-home salary of the account holder. It is usually 2-3 times of the monthly salary. An overdraft facility allows you to withdraw a larger amount than the current balance you have in your bank account. Banks may charge a one-time fee or processing charges for offering this facility.

Suppose your bank balance is Rs. 1 Lakh, and you are eligible for a salary overdraft of up to Rs. 1 Lakh, then you can withdraw a total of 2 Lakhs. The overdrawn amount of Rs. 1 Lakh is the pre-approved personal loan amount which has to be repaid along with interest.

Unlike a personal loan, pre closure or part payment of OD account doesn’t carry prepayment fees, or foreclosure charges. Further, interest is calculated only on the withdrawn amount and not on the sanctioned credit limit. Interest repayment starts only when you have withdrawn from the OD account.

*Why Choose an OD Account Over a Personal Loan?

a.) Quick Disbursal: Each personal loan has to undergo a detailed process for sanction where the turnaround time can range between 1-3 days. On the other hand, once you have set up your OD account, you can withdraw money any time. In that sense, an OD account can give you instant personal loan compared to traditional personal loans.

b.) Ease of approval: Since, overdraft is granted on your salary account with a regular inflow of income, banks are generally lenient on credit score. On this front, getting a salary overdraft may work out to be an easier option compared to getting an unsecured personal loan where the minimum CIBIL required is 700 and above for most of the banks.

c.) Affordable: Not only overdraft facility is lenient with fines and penalties but also allows you to minimise your interest outgo if you have surplus funds available as compared to the conventional personal loan where you pay an interest over the entire loan amount.

d.) Easy Repayment: Overdraft account offer flexible tenure ranging from 12 to 60 months depending on the scheme you choose. With flexibility to withdraw and deposit surplus amount in the overdraft account and low interest rates, the monthly cash out flow on overdraft can be quite low as compared to that on personal loans. Hence salary overdraft loans are easy on your pockets and won’t put a dent in your budget.

In conclusion, individuals having salary accounts will stand to gain by taking a salary overdraft which offers the convenience of withdrawing cash at minimal interest rates, is instantly disbursed and is the relatively less stringent in terms of credit score eligibility. The Salary Overdraft facility can really come handy when you require some extra money after paying the house rent, loan EMIs, and other pending payments.