Overdraft. Its Advantages And Drawbacks

Overdraft ( over draft – over the limit) loan amount is transferred to a plastic card in the amount to be determined by agreement between borrowers and lenders in case of temporary absence from the Borrower’s funds for urgent payments.

Overdraft is a form of short-term loan, which is done by debiting the customer’s account over the balance of his funds in the account. There is no own money on the card in the borrower takes the debt, the amount of money on a plastic card becomes a negative value.

Overdraft is a type of lending mode credit line – namely, a loan that is granted to the borrower by money transfer to a plastic card.


Overdraft is short-term loan, part or full amount of which is used by the borrower to implement the sudden, unexpected costs.

This credit is characterized by the lack of purpose: it can be spent for any purpose, satisfying customer needs. Borrower does not have to report to the lender on what targets had been spent overdraft amount.

The difference of credit in credit line from the conventional loan is that the loan in the mode of credit line is available to the borrower not once, but an unlimited number of times. If an ordinary loan is usually taken once, once in the form of a sum of money and then repaid over a period of time, the line of credit borrower can be used repeatedly throughout the term of the loan agreement.


If costs of borrower permanently exceed its revenues, the continued use of overdraft is not a sensible decision.

The credit limit is set in advance by agreement between creditors and borrowers. At the same time borrower can use as the entire amount available to him at a credit line, and only part of it.

The sum of overdraft is a limit determined depending on the level of income borrower.

The sum of debt on the loan can fluctuate depending on changes in the real needs of the borrower, which independently regulates the sum of his debt to creditors.

It is very convenient if the borrower does not know exactly at what amount of money he will need and if needed at all – because he will pay interest only to the Lender for the amount of money actually spent for the actual number of days of credit line of the so-called method ‘ fact / fact. ”

Credit in the mode line of credit may be granted to the borrower through the issuance of funds through cash or by transferring funds to the current account of the borrower.

If the sum of credit granted to the current account by establishing a credit limit agreed by the parties, and the current account of the natural person is usually his card account, such credit will be an overdraft facility. That is a loan in the mode line of credit, provided on a plastic card of the borrower or any other current account, called an overdraft facility.

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