Overdraft Facility
What Overdraft Facility means
A revolving credit arrangement where you can withdraw up to a sanctioned limit, repay at any time, and re-borrow; interest is charged only on the daily outstanding balance.
Example
A home loan structured as an overdraft lets you park surplus salary in the loan account, reducing daily outstanding principal and interest without losing liquidity.
This definition is based on RBI – Master Direction on Loans and Advances ↗. We link every figure to its primary source — see our data methodology.
Related loan type terms
- Balance TransferMoving an outstanding loan to a new lender who offers a lower interest rate or better terms, reducing the total interest burden. Processing fees and legal costs apply and should be factored into the savings calculation.
- Bridge LoanA short-term secured loan (typically 6–12 months) that provides funds to purchase a new asset before an existing asset is sold. Interest rates are higher due to the temporary and transitional nature.
- Loan Against PropertyA secured multipurpose loan where an owned property (residential, commercial, or industrial) is pledged as collateral; funds can be used for business expansion, education, medical emergencies, or any lawful purpose.
- Top-up LoanAn additional loan disbursed by the existing lender on top of an already-running loan, secured against the same collateral, after a satisfactory repayment track record. Interest rates are typically at par with the underlying loan.