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Over Draft Limit

It is the maximum amount that your bank is prepared for you to borrow from your current account. The overdraft utilized will determine the interest that will be payable by the customer. Overdraft against property is a flexible product offering that allows a person / firm a combination of term loan and overdraft facility against residential or commercial property. This product is useful for professionals, Sole proprietors, proprietorship firms, partnership firms or a private limited company.

In simple terms, overdraft can also be understood as an instance when money is withdrawn from bank account and the available balance goes below zero and in this situation, the account is said to be overdrawn. So when a person / firm go in to an overdraft, it is getting in to debt.

Overdraft can be authorized or unauthorized. In case of the former, one agrees to the borrowing limit and the agreed rate of interest whereas in the latter case, bank may charge a rate of interest it deems fit or right. Some important suggestion and observations regarding overdraft:

  • It should be treated as an emergency fund or a short term credit option.
  • Always ask yourself if you require an overdraft or there are better options existing for you.
  • Be clear about the terms and conditions of the lender and check the fee levied.
  • Enquire about the unauthorized overdraft also with the lender. Try to gather facts on how a particular lender treats an unauthorized overdraft and what liability it creates. Unauthorized overdrafts come with a lot of fee.
  • If you feel the need to exceed your overdraft limit, tell the bank prior.
  • Read the notifications that you receive from bank from time to time as it is not junk, it can be a word of caution, suggestion, new feature that could be beneficial and so on.
  • Banks sometimes agree to waive off the fee, the only thing is you have to ask for it.

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