Personal Loan Overdraft Facility Explained: Key Information and Benefits

If you ever find yourself in a situation where you’re falling short on cash, you can always use your savings or borrow money from your friends and family. However, there’s a smarter option that won’t drain your savings or let money come between you and your loved ones. Instant Credit.

In today’s time, the emergence of new loan products and facilities is helping millions of Indians meet their diverse financial requirements, each day. Of these several credit products so easily available in the market, an overdraft loan could be the perfect solution for your cash needs. Read this blog to find out how. 

What is a Personal Loan Overdraft Facility?

A personal overdraft loan is a pre-determined credit limit from which you can withdraw money whenever you need. The approved limit is usually offered by a financial institution where you already hold an account.

 The approved credit limit will be at your disposal every time you need money. And one of the best parts of an od personal loan is you have to pay interest only on the money you utilize from the limit.

This facility is extremely helpful during emergencies or for any kind of unforeseen expense as you will have a financial cushion to fall back on.

How Does The Personal Loan Overdraft Work?

While the way overdraft loan facility works may vary among different banks and NBFCs, you can identify some similarities in their basic functionality.

If you have an account with a financial institution that has an overdraft loan facility and you have exceeded your balance, you can opt for an OD limit loan. There are also many other lenders who offer similar services.

You will get a pre-determined loan limit from the institution from which you can withdraw money as and when you need it.  

Interest is applicable only on the utilized amount from the od loan limit. And you will be obligated to repay only the borrowed amount according to your repayment plan.

Difference Between Overdraft and Personal Loan

Overdraft loan

Personal Loan

An Overdraft loan is a credit facility offered to current account holders where they get a pre-determined loan limit. They can withdraw money from it whenever they need.  

A personal loan is a fixed amount you can borrow once from any bank or NBFC at a particular interest rate. If you need another loan, you will have to apply or request a loan again.    

You will be charged interest only on the amount you avail. Overdraft meaning is understood better upon understanding how the interest charges on it work.

When you avail a personal loan, there will be an interest charged on it. You will have to pay back the complete interest when repaying your EMIs.

Also Read: Why Opting For an NBFC Personal Loan is a Better Option? 

Advantages of Taking Overdraft Personal Loan Facility

Simple Documentation for Overdraft Personal Loan

If you’re availing overdraft loan facility from an existing bank or NBFC, you won’t have to go through too much documentation to get approved for an od loan limit.

Flexible Repayment Options

You only have to pay back the amount you utilize from your available od loan limit. Typically, you get to choose among various repayment options, based on your budget.    

Make Multiple Withdrawals From Your Approved OD Personal Loan

Once you’re approved for a personal overdraft loan, you can withdraw money from it anytime, how many ever times you need.

Fixed Limit 

The Od loan limit you’re approved for is pre-determined by your lender. This way, you will always have peace of mind that you have a fixed amount at your disposal.  

Types of Personal Loan OD Facility

Overdraft Loan for Salaried People

If you have a salary account that could be linked to an overdraft credit facility, you can access your OD loan limit directly from that account.

Overdraft Against Equities/Stocks

You can make the most of your equity or stock investments to get an overdraft loan. The limit you’re offered depends on the market value of the stocks.

Overdraft Loan Against Collateral

If your financial institution offers an overdraft loan against collateral, you can provide any asset as security to avail of this loan facility.

Overdraft Against Fixed Deposits and Insurance Policies

You can get a personal overdraft facility by using your fixed deposits as collateral and surrendering the value of your insurance.  

Features Of Personal Loan Overdraft Facility

In today’s time, banks and NBFCs are expanding their range of products and services. If you already have an active account with any financial institution, you might be able to avail this facility. And while their way of operation may differ, these are some common features you can enjoy.

  • Flexible repayment options
  • Easy application process
  • No documentation or paperwork
  • Ease of paying interest only on the utilized amount.

Don’t have an active account? Don’t worry! Zype offers a similar service where you can get a credit line of up to ₹5 lakhs. Withdraw money from it whenever you need and pay interest only on the utilized amount. You can get the app from the PlayStore/AppStore and complete your application in less than 5 minutes. Get approved for a loan in 60 seconds and receive the loan directly to your registered account within 24 hours.

Also Read: What is FOIR and How is it Calculated on a Personal Loan?

Eligibility For Personal Loan Overdraft

Understanding overdraft loan eligibility of your lender before even requesting for the facility is a good borrowing practice. Usually, only those individuals can apply for an overdraft personal loan who already have an active account with the bank or NBFC. 

If that’s a blocker for you, you can always avail a similar service from Zype. And Zype’s eligibility criteria is simple.

Age: 18 years or above

Citizenship: Indian with a valid PAN & Aadhaar card

Work experience: Salaried individual

Monthly salary: Monthly income of at least ₹15000

Documents Required For Personal Loan Overdraft 

One of the best parts about applying for a personal overdraft facility is the simple application process. If you already have an account with a financial institution, you don’t need to provide a lot of documentation. And while the requirements may differ depending on the bank and NBFC, there are some common requirements. Keep these documents handy.

  • A valid PAN and Aadhaar card.
  • KYC documents like Aadhaar card, utility bill, driver’s license, etc. 
  •  Income proof like salary slips and bank statements

How to Apply for a Personal Loan Overdraft? 

If you want to avail of an overdraft loan facility from an existing lender or financial institution, you can apply for it on the same platform from where you availed other services.

Don’t have an active account? You can apply for a Zype credit line that offers a similar service in these 6 simple steps:

1) Download the app from PlayStore/AppStore to start your application.

2) Create your account by completing a mobile OTP and entering your basic details such as your name, employment details, PAN, etc. to complete your application.

3) If you’re eligible, you can get approved for a personal loan in less than 60 seconds.

4) Complete a real-time selfie verification and Aadhaar-linked OTP to unlock your approved limit.

5) Select a repayment tenure that fits your budget along with the loan amount you want to transfer to your bank account.

6) And that’s it! You will receive the loan within 24 hours. You can keep transferring cash from your approved credit line to your bank account whenever you need it!

Conclusion:

Personal loan overdraft facilitates can bridge the gap between you and your financial requirements, at all times. You will always have peace of mind that you have an additional source of cash to fall back on. All you need to do is apply for a personal overdraft loan with a financial institution where you already have an account. 

And in case you don’t, you can always choose a lender who offers similar services. Zype is such a loan app, where you can apply for a credit line up to ₹5 lakhs in 5 minutes. Download the app from PlayStore/AppStore and always have instant access to money.

Frequently Asked Questions

Can I withdraw funds from my personal loan overdraft anytime?

Yes, you can! Once you’re approved for a personal overdraft loan, you can withdraw money from it anytime, how many ever times you need cash.

How quickly can I get access to funds through the personal loan overdraft?

The processing time for getting money through a personal loan overdraft can be different for different financial institutions. But typically, you can withdraw money from your approved limit instantly.

Can I use the personal loan overdraft for any purpose?

Yes, you can! There is no restriction on the end usage of this loan.

Is the personal loan overdraft available for salaried individuals only?

Yes. There are many financial institutions in the market that offer personal loan overdraft specifically for salaried individuals. Typically, this falls under the category of overdraft loan for salaried people

Can I use the personal loan overdraft for business purposes?

Yes, you can. Usually, there is no restriction on the end usage of the money you withdraw from your overdraft.

What are the repayment options for the personal loan overdraft?

You have to repay only the amount you utilize from your OD loan limit. You can repay the personal loan overdraft as per your convenience. However, it’s important you go through your terms of borrowing to confirm the same.

Can I increase the overdraft limit of my personal loan?

You can always apply for a higher overdraft limit. However, it’s important you enquire about the same with your provider.

What is the maximum loan amount available under the personal loan overdraft?

The maximum loan amount available under the personal loan overdraft can be different for different lenders. However, it is usually 2-3 times your monthly salary.

Can self-employed individuals apply for a personal loan overdraft?

Yes, they can. There are many financial institutions in the market that offer personal loan overdraft to self-employed individuals. 

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