Overdraft Against Fixed Deposits
Apply Now

Overdraft is a banking facility available to current account holders which allows them to withdraw more money than they have in their account. It is a form of short-term borrowing in the case of emergencies and is treated as a loan. The maximum overdraft limit and the deadline for repaying the loan are usually predetermined. Overdraft enables you to secure a loan at a favourable interest rate and steer clear of penalties for insufficient funds, such as bounced check fees and returned payments.

Typically, overdrafts are categorised into two types: secured and unsecured. Secured overdrafts are backed by collateral, serving as a safety net in the event that the borrower is unable to repay the loan. Conversely, unsecured overdrafts lack any form of collateral support.

Types Of Overdrafts Against Securities:

1. Overdraft against FD (Overdraft Against Fixed Deposits) 

An OD against FD is one of the fastest and most efficient ways of borrowing money since the bank already has your FD as collateral.

The borrower is allowed to overdraft up to 90% of the existing FD’s value by the bank and the interest rate for the OD is generally 1 to 2 % higher compared to the Interest rate offered by the FD. Meaning if your FD earns you 6% interest per annum, your overdraft will cost you around 7 to 8% per annum.

2. OD against LIC Policy: 

You can use your LIC insurance policy as collateral for a swift overdraft facility. With OD against LIC policy, the amount of overdraft that will be sanctioned depends on the value of the LIC policy that the borrower has submitted. It’s important for borrowers to be aware that the value of a LIC policy exceeds that of a fixed deposit, thereby allowing for a larger overdraft amount if the LIC policy is used as collateral instead of a fixed deposit.

3. OD Against Property (Overdraft Against Property)

Mortgaging a house or a piece of land as collateral against your OD is known as an overdraft against the property. Generally, the borrower can get around 40 to 50% of the property’s worth as a sanctioned overdraft amount. The bank will also consider your repayment capacity and credit history while approving the overdraft. 

Eligibility Criteria For OD Against Securities

  • First and foremost, the applicant seeking an overdraft must have a pre-existing bank account with the bank they are applying to.
  • The applicant shouldn’t be younger than 21 years or older than 65 years of age.
  • Some lenders also have a minimum income requirement. The minimum income amount can vary from lender-to-lender.
  • A good credit score will be an advantage.

Documents Required For OD Against Securities

  • Application form for the Overdraft facility. It should be filled and signed along with passport-size photographs of the applicant.
  • Applicant’s Identity Proof, such as Passport, Voter ID card, Driving License, PAN card, Aadhar card.
  • Proof of address. (Driving License, Voter ID, water bill, electricity bill, etc)
  • Bank statement for the last 12 months.
  • Any other specific document that the lender requires.

Benefits Of OD Against Securities

1] Saves you from penalties:

In emergencies, you might need to break your FD to get money or have your cheque bounced and end up paying a penalty. However, with the overdraft facility, you can borrow money; at minimum interest rates to fulfil your financial needs and not pay any penalty.

2] No processing fees:

Generally, when you apply for a loan, you have to pay a processing fee. However, while applying for an overdraft you do not have to pay a processing fee, reducing your overall cost of acquiring money.

3] Helps a lot during emergencies:

You can get an overdraft quicker than other loans and the process is easier as well compared to term loans. It means you can acquire the money faster and take care of your business in a much more efficient way.

4] Daily Interest Calculation:

For an overdraft, you can repay any part of the amount at any time, hence the interest rates are calculated daily. Meaning, you have to pay interest on what you owe rather than a fixed amount.

Overdraft offers a great many options for a person who is interested in availing a loan against a security, a  person can also get unsecure overdraft loan. In order to procure an unsecure loan, you need to look for a reputed unsecured business loan providers in Mumbai. 

As one of the foremost  loan agents in mumbai, we are always here to help you understand the process and guide you through it. So, do not hesitate to get in touch with us.