Over Draft

Overdrafts are usually used for short-term cash flow management and are often used to cover unexpected expenses or to bridge the gap between income and expenses. They can be a flexible source of funding as they allow the account holder to access credit when they need it, rather than having to apply for a formal loan.

Overdrafts can be either secured or unsecured. Secured overdrafts require collateral, such as property or investments, to secure the loan. Unsecured overdrafts do not require collateral but may have higher interest rates than secured overdrafts.

The eligibility criteria for an overdraft facility vary depending on the bank and the type of account. However, there are some general factors that banks typically consider when evaluating a customer's eligibility for an overdraft:

1. Account history: Banks may evaluate the customer's account history, including their account balances, transaction history, and credit history, to determine if they have a good track record of managing their finances.

2. Income and creditworthiness: Banks may assess the customer's income and creditworthiness to determine if they have the financial resources and ability to repay the overdraft. This may include reviewing the customer's credit score, income sources, and other financial information.

3. Relationship with the bank: Customers who have a long-standing relationship with the bank and a history of responsible account management may be more likely to be approved for an overdraft.

4. Overdraft limit: The amount of the overdraft limit may depend on the customer's income, credit score, and other financial factors. Customers with a higher income or credit score may be eligible for a higher overdraft limit.

5. Collateral: Depending on the bank's policies, customers may be required to provide collateral to secure the overdraft. Collateral can include assets such as property, investments, or other assets that the bank can seize if the customer defaults on the overdraft.