Not many Malaysians can define how overdraft (OD) facilities are used. In fact, if you are like most people, you probably have questions about this banking option. To understand this banking feature, you need to define an overdraft. An overdraft is a line of credit that can be retrieved via a current account. Usually, a customer can only withdraw the money that is in his or her bank account. However, with an OD facility in place, he or she can withdraw more than what is available. This amount is set by an approved credit limit.
How Interest Is Determined
The interest for an OD is related to the base lending rate (BLR), and therefore is determined by the utilised amount of the overdraft. For example, an overdrawn amount is multiplied by the current interest rate by the number of days.
Choosing a Cash Out Option
Some people who are seeking a cash loan wonder how they should proceed. Should they choose an overdraft facility, mortgage, or personal financing? An overdraft loan in Malaysia you can consider as an elite overdraft loan. Again, this type of loan allows you to access standby funds up to an approved credit limit. You do not need to supply collateral for this loan if you have an existing loan with the bank.
The Approval Process
Once approved for the loan, your funds are available at any time. When you compare this loan to mortgage refinancing, the approval process is similar. Both types of loans involve an approval process that is detailed. A personal loan, by contrast, features a simple process for approval.
Loan Tenures
When you choose an overdraft loan, your tenure is variable, with no restrictions on the tenure. The access to the facility and the credit limit is reviewed annually by the financial institution. If the loan is a mortgage, it must be repaid within the designated tenure. A cash out for mortgage refinancing is generally limited to ten years. The limit for the tenure of a personal loan is also the same amount of time.
Interest Rates
The interest rates for overdrafts are normally higher than for mortgage financing. However, the interest that is charged is only assessed on the utilised amount. The interest on a personal loan is based on a flat interest rate and therefore is usually more expensive than the interest charged for an OD.
Repayment for an OD loan can be made at any time and in any amount. However, interest charges will still accrue on the loan’s outstanding balance. Both mortgages and personal loans feature regular and timely instalments.
With an OD loan, you can draw down a number of times, per your needs, any amount within your assigned credit limit. Mortgages and personal loans feature drawdowns in fixed and lump sum amounts.