Dropline Draft Limit
Dropline overdraft limit is a facility granted to you where you can overdraw your current account up to an agreed limit. Overdraft is an efficient form of borrowing as you pay interest only for the time you use the money. It gives you flexibility. You can at any time deposit money in to the account to reduce the outstanding balance or can draw out money whenever you need it as long as you do not exceed the limit. Interest is calculated daily on the fluctuating outstanding balance and is normally charged at the end of each month.
Dropline overdraft comes with an advantage over a simple overdraft. In case of dropline overdraft, overdraft facility is combined with that of features of term loans and rather than charging a fee each year, there is only one time processing fee. Banks offer this service only after securing itself with collateral. But there are unsecured dropline overdrafts also where bank / lender do not ask for collateral. For the entities with good track record, the banks and NBFCs can offer up to Rs. 50 lac. Most of the top banks offer this facility.
When you have dropline overdraft under consideration
- Make sure that you maintain a good transaction record with the bank
- Understand the eligibility criteria for dropline overdraft well
- It can prove to be a better way to raise finances when required compared to term loan