A Brief Guide on Personal Loan Overdraft Facility
A personal loan overdraft, also known as a Personal Line of Credit or Personal Overdraft Facility, is a financial product offered by banks and financial institutions that combines the features of a personal loan and an overdraft facility. It provides individuals with a pre-approved credit limit that they can borrow against as and when needed up to the maximum limit. It is quite a useful facility for those who are in need of short-term borrowing flexibility.
If you are looking for one and wish to understand in detail about it, then here we are providing you insights into how personal loan overdraft works, its benefits, and other significant details.
How Does Personal Loan Overdraft Work?
The bank or lender determines a maximum credit limit based on the borrower’s creditworthiness and other factors. This limit represents the maximum amount of money the borrower can borrow through the overdraft facility.
Unlike a traditional personal loan where you receive a lump sum upfront, with a personal loan overdraft, you have the flexibility to borrow any amount up to the credit limit whenever you need it. You can withdraw and repay funds multiple times within the set limit.
Interest is charged only on the amount you borrow and for the period you utilise the funds. The interest rates on personal loan overdrafts may be higher than regular personal loans because of the added flexibility and convenience.
Also, repayment terms vary, but generally, you need to make minimum monthly payments towards the outstanding balance. The minimum payment may consist of the interest accrued along with a portion of the principal amount. You have the option to repay the outstanding amount in full or make additional repayments at any time just like personal loan repayment.
Who Is Eligible for Personal Loan Overdraft?
To be eligible for a personal loan overdraft, the individual must be an Indian resident and at least 21 years of age at the time of loan application. Other than this, he/she must have:
- A good credit score, generally more than 750
- Stable income and employment
- A lower debt-to-income ratio, indicating their ability to manage additional debt
- Great financial history whether it is a personal loan, credit card, etc.
- Necessary identification documents such as valid ID and address proof
Benefits of Personal Overdraft Loan
Personal overdraft loans offer several benefits:
- Borrowers have access to a predetermined credit limit and can withdraw funds whenever needed
- Interest is charged only on the utilised amount, thereby, saving money compared to traditional loans
- It provides an instant source of funds during emergencies without the need for a lengthy loan approval process
- Personal overdraft loans typically have lower interest rates compared to credit cards or other unsecured loans.
- Borrowers have the option to make minimum payments or clear the outstanding balance without prepayment penalties
- Funds can be accessed easily through checks, online transfers, or ATM withdrawals, making it a convenient borrowing option
Now that you know the fundamentals of personal loan overdraft, get ready to avail yourself the best loan options. You can also apply online for Airtel Personal loan as per your requirements.
