Overdraft

An overdraft is a short-term credit facility enabling individuals or businesses to withdraw beyond their bank balance, up to a set limit. Used for temporary cash shortages, emergencies, or unexpected expenses, interest applies only to the overdrawn amount. Repayment is typically on demand or within a specified period.

Cash Credit Limit

Cash credit is a bank-provided credit facility for businesses, catering to their working capital needs. Businesses can withdraw funds within a specified limit, with interest charged on the utilized amount. Repayment is flexible, aligning with the business's cash flow. The limit is periodically reviewed and renewable based on creditworthiness.

Key Points:

Overdraft and cash credit limit are short-term credit facilities provided by banks.

Overdraft allows withdrawing more money than the available balance in a bank account, up to a predetermined limit.

Cash credit limit is a credit facility for businesses to meet their working capital requirements.

Interest is charged only on the amount utilized in both overdraft and cash credit limit.

Repayment terms are flexible and depend on the borrower's creditworthiness.

In conclusion, overdraft and cash credit limit are useful credit facilities that provide flexibility and convenience for individuals and businesses to manage their short-term financing needs. However, borrowers should carefully understand the terms and conditions, interest rates, and repayment terms associated with these credit facilities before availing them from a bank. It's always advisable to consult with a financial advisor or bank representative to make informed borrowing decisions.