Over draft facility is somewhat similar to credit card facility issued by banks. In credit card though we pay money regularly, we will use more money less than available in our account. As we know the fact that, we keep on maintaining credit card facility as an option where it is quite helpful in shopping malls, hospitals and now everywhere due to smart cards popularity existence throughout the world. Similarly this overdraft facility functions the same where the banks allow the user to withdraw more amounts of money and sometimes which is not had in our account to withdraw depending on credit limit issued by banks. This kind of situation is termed as cash line facility also. This overdraft facility in Malaysia also determines the same functionalities like it acts as a kind of demand loan where a loan is issued by banks to lenders when they might require repaying it at any time intervals instantly.
Actually this facility clearly determines the essence of issuing loans to lenders and subsequent banks will decide complete total overdraft amount depends on terms and conditions that are applied to. It means the calculation amount that is decided where also the overdraft limit depends on the discretion of banks only. For suppose, if you pledge a property of RM 5, 00,000. Then the banks decide calculated over draft amount of 50%. That means it is up to RM 2, 50,000. This process of pledge by banks will make you sure that your property value will be based on the credit limit of your account decided.
Consider some of the banks that provide overdraft facility in Malaysia; it includes CIMB Credit Line Secured Overdraft, HSBC Personal Overdraft (cash line facility) and May bank Overdraft (Cash Line Facility) etc.
Some of the crucial things to be concentrated while applying for an over draft facility. It includes, you are necessarily requires a bank account where you are offered with this facility. If there is a case that your existed account does not have this facility, you may request your banker to know the availability of this option.
The Advantages of an Overdraft facility:
- Flexibility: This option provides you a predominant freedom in deciding how to make your repayments with the absence of your desired repayment schedules you are essentially needs to deserve to. You have an option of deciding your payment schedule and work on it sequentially that specifically suits you and along with the interest and the principal amount when you are interested and wants to settle for an overdraft.
- You have even provided with an option of paying interest for where you use its facility. It means you will be charged with interest on the amount you use from this overdraft option. It also means the interest charge will not be inculcated to the remaining amount that was not used by you from the overdraft facility issued by the bank.
Disadvantages: Moreover this facility provides you plenty of useful options for payments or repayment purposes. But there is only one drawback associated with this facility is increase in higher interest rates. This is the reason why banks grant you this demand loan easily and allows you to use as required and more than required and pay or repay whenever you want to pay and gives you complete freedom of using it. But they simply ask you to pay more interest rates when you do not pay during repayment schedules decided by banks. These interest rates will be fined with more charges depends on amount of overdraft you used.
Summary: The essence of overdraft facility is awesome in its features when you pay accordingly on a prescribed period of time intervals only. You can pay anytime and you will be charged with interest only for the used amount of overdraft only.