An overdraft is an instrument of finance that still has withdrawn the process of money from the savings and current account, even in case the account balance goes below zero. This is a kind of expansion of the limit of monetary provided by the bank and is said to be overdrawn money.
An overdraft limit that is authorized is specified for every client based on their rapport with the bank. The client can withdraw their money up to the prescribed limit. The banks collect interest on the amount withdrawn as an overdraft.
The rate of interest on the overdraft facility by public and private banks will vary from lender to lender and is based on the loan amount that required a repayment period, and rapport with the concerned bank or institution of finance.
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Overdraft Facility Features And Benefits
- Additional business funding is when you require this and an additional cash flow is reserved when unexpected expenses occur or when clients are delayed in making payment.
- Continuous credit line in your bank account of the business, the availability of credit line in the agreed overdraft period.
- Effective, flexible lending interest is collected only when your bank account the business is in debit.
- Fast process of approval with minimum extra support required documents.
- Suitable multi-channel access.
- Flexible facility period
- Proper pricing, business overdraft arrangement amounts, and the lowest interest rate in the United Arab Emirates.
- Valid passport or national identity card with UAE residence visa and all signing authorities and shareholders.
- Valid documents such as trade license, commercial registration certificate, partnership agreement, and memorandum of association as applicable.
- Power of attorney if applicable
- Address proof
- Information of ultimate beneficial owners
- Bank reference letter and company profile
- Audited financial statements.
An overdraft is an important facility offered by the banks, as it aids businesses in the condition of cash flow to complete their working assets expenditure. The businessmen must wait for payment from its customer and consequently delay payment. The businesses may sign the cheques for their customers beyond the funds available in their account, with overdraft support in their current account. It prevents cheque dishonor and preserves the business reputation.
Nowadays, in the banking system, many banks offer an overdraft facility for salary and saving accounts. How to be, this overdraft facility is not provided for everyone. Only those clients eligible to delight in this facility who have a good reputation in the condition of repayment and have good credit scores. In addition, the overdraft facility needs a fixed annual fee, and clients have the right they can discontinue the service when they wish to do.
Types Of Overdraft Facility
Overdraft against Salary
The businesses opened salary accounts for its employee that are qualified for such facilities. The minimum need for delighting overdraft facility in the salary account is to receive a continuous monthly salary that the company has credit. The company comes on the bank approval list.
- The bank provides overdraft over three times of client’s current salary.
- This kind of facility is required minimum documents and it has an easy-repay feature.
- The clients need to pay interest on the used amount without pre-closure fees.
- This kind of overdraft has no need for any kind of protection.
- Certain banks provide overdrafts according to the specified amount by the bank.
Overdraft on Savings Account
An overdraft on a saving account has earned popularity because it is supported by the government. To delight in this facility the accounts, have to be operated satisfactorily for a tenure of six months and only one member of a family qualifies for this facility.
Overdraft against Time deposits
Time deposits, like fixed deposits, qualify for an overdraft facility. How to be, all banks do not offer this kind of facility as it is subject to the policy of the bank only.