Overdraft
An overdraft loan is a versatile financial tool offered by banks to account holders, allowing them to withdraw funds exceeding their available balance up to a predetermined limit. This facility serves as a safety net for managing short-term cash flow gaps or unexpected expenses without disrupting financial operations. Interest is charged solely on the overdrawn amount, offering flexibility in managing liquidity needs.
Overdraft (OD) Loan:
- Definition: An overdraft is a financial facility that permits an account holder to withdraw more money than the available balance in their account, up to a set limit.
- Usage: Overdrafts are commonly utilized to bridge temporary shortages in funds, offering flexibility for both individuals and businesses to manage their cash flow effectively.
- Interest: Interest is applied to the amount overdrawn, and the rate can fluctuate. Overdrafts essentially function as a credit extension provided by the bank.
An overdraft loan is an invaluable financial tool for businesses and individuals seeking flexibility in managing their day-to-day finances. With competitive interest rates and minimal documentation requirements, overdrafts offer a convenient solution for addressing short-term liquidity needs promptly.
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