Overdraft Loan

An Overdraft Loan is a flexible credit facility provided by banks and financial institutions that allows individuals or businesses to withdraw more money than their current account balance. It is mainly used to manage short-term cash flow needs or working capital requirements.

Key Features

• Withdraw funds exceeding your account balance up to a set limit
• Interest charged only on the utilized amount
• Credit limit can be revised based on account performance
• Revolving credit – repay and reuse as needed
• Secured or unsecured, depending on borrower profile

Eligibility Criteria

• Indian residents, businesses, or self-employed professionals
• Active current or savings account with the bank
• Good banking history and credit profile
• Stable income or business revenues

Required Documents

• KYC documents (Aadhaar, PAN, etc.)
• Bank account statements (last 6–12 months)
• Proof of income or business turnover
• Business registration documents (for firms/companies)
• Collateral documents if secured OD is requested

Benefits

• Ensures liquidity for short-term or urgent expenses
• Interest is charged only on the used amount, not the limit
• No fixed EMI – repay at your convenience within the limit
• Improves cash flow for individuals and businesses

Top Banks Offering Overdraft Loans

Overdraft facilities are offered by SBI, HDFC Bank, ICICI Bank, Axis Bank, Kotak Mahindra, Bank of Baroda, and various cooperative and regional banks.

Important Notes

• Interest rates vary based on usage and repayment history
• Unused limit does not attract interest
• Failure to repay may affect credit score and account status