If you have a bank account, then you can withdraw money by taking advantage of the free overdraft facility. Most people would not have known about this special feature, even if they do, they do not know how to use it. Let’s tell everything about it
Many times an emergency comes suddenly and in such a situation you need money, what will you do? Usually in such a situation people borrow money from friends, relatives. But you don’t need to do that. If you have a bank account, then you can withdraw money by taking advantage of the free overdraft facility. Most people would not have known about this special feature, even if they do, they do not know how to use it. We are going to tell you about the overdraft facility of banks, which can meet the need of sudden money.
What is Overdraft facility
Actually, the overdraft facility is similar to a short term loan. Through which the account holder can withdraw money from his account even when there is no money in his account or there is absolutely zero balance. Overdraft facility is available in almost all government and private banks. In most banks, this facility is available on current account, salary account or fixed deposit. In some banks, overdraft is also available on things like shares, bonds, salary, insurance policy, house, property.
Pre-determined limit
Usually, the bank keeps informing its customers through messages or e-mails that they can take the facility of overdraft. The limit of this overdraft is already decided by the bank. This facility of salary overdraft is very useful when there is a sudden expenditure. If your EMI, SIP or any check is attached, then there are chances of it getting bounced. But this dilemma can be avoided by availing the facility of overdraft.
Overdraft process
If there is a need for cash at the time of emergency, then you have to apply for it in the bank, just like you do for any other loan. Those with muggle salary and current account have some ease. Under overdraft, you will get money from the bank at the time of need, since it is only a loan that you will have to repay later and will also have to pay interest on it.
How much will you get overdraft
How much interest will be charged on the overdraft and the amount will be given, it depends on what you are keeping as collateral or mortgage. For overdraft, you have to pledge something in front of the bank. Like fixed deposits, bonds or shares. Accordingly, the limit of cash can be increased or decreased. For example, if you have an FD of Rs 2 lakh in the bank, then you can get an overdraft of up to Rs 1.50 lakh. This amount can be more or less in case of shares, bonds and debentures.
Know this condition
Overdraft facility can be availed in a joint also. In such a situation, it will be the responsibility of both of them to pay the money. On the other hand, if one is not able to pay one amount, then the other will have to pay the full amount. There will be risk on the things pledged. If you are not able to pay the overdraft, then it will be reimbursed by the things pledged by you. But if the overdrafted amount is more than the value of the things pledged, then you will have to pay the remaining amount.
Generally, banks also give overdraft against your salary account. This can be 2 to 3 times the salary. For this type of overdraft facility, your salary account should be in the same bank. From which you want to take overdraft. For example, if you have a salary account with SBI, then it is necessary to have credit in at least 6 regular salary accounts for overdraft. At the same time, if you have an FD in SBI, then you can take an overdraft up to Rs 5 crore on it.
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