Many people need to borrow money sometimes, either to achieve their goals or when there’s an urgent situation. In these times, different financial products are available to help you get a loan easily.
Besides personal loans, there are other options out there to help you with your needs. Some people might not know about these choices. Let’s talk about a few financial products like overdraft, flexi loan, and personal loan, which can help you meet your needs.
What is an overdraft?
When you need money but don’t have any in your bank account, you can use something called an overdraft. It lets you take out money even if your account balance is zero.
The bank decides on a limit for your overdraft. You can then take out money up to that limit. The bank charges interest based on how much you take out.
The special thing about an overdraft is that you can pay back the money whenever you want. There’s no fixed time for returning it.
The bank already sets the limit for your overdraft. You can only take out money up to that limit. This is a credit facility connected to your bank account.
What is Dropline Overdraft?
Dropline Overdraft is another type of overdraft. With this, your credit limit decreases over time until it becomes zero.
Here’s an example: If your bank gives you a limit of Rs 6 lakh in overdraft, and with Dropline Overdraft, the duration is three years.
You can withdraw Rs 6 lakh once within a year or multiple times before the year ends. If you don’t withdraw Rs 6 lakh in a year, the credit limit decreases.
It becomes Rs 4 lakh in the second year, Rs 2 lakh in the third year, and finally, it becomes zero. This means the overdraft facility becomes zero in the third year. Dropline overdraft is like a mix of a term loan and an overdraft.
