Banking Basics – Overdrafts
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Today we talk about overdrafts, what they are and how to manage them.
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I am not a financial advisor, all my videos are for education purposes only.
What you need to know about Overdrafts
What are overdrafts? In this video, we will explain why it’s important to understand the difference between an arranged overdraft and an unarranged overdraft.
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What is an Overdraft? | Bank Overdraft | Comparision of Overdraft With Personal Loan
An overdraft is a credit offered by a banking institution when your account balance touches zero. With the help of the overdraft facility, you can continue withdrawing from your account even when the balance is insufficient or has no balance.
An account overdraft happens when you withdraw more money than the available balance. For example, if you withdraw Rs 25,000 from your account which had a balance of Rs 10,000, then your account is said to be overdrawn to the tune of Rs 15,000. To avail this facility, you will have to hold an overdraft account with your banker.
Comparison of overdraft with a personal loan:
i) Faster processing:
The processing of a personal loan takes a longer time as it involves a tedious procedure if you don’t have a preapproved loan. You need to have a good credit score to secure a personal loan. On the other hand, availing the overdraft facility is much faster and hasslefree as compared to a personal loan.
Personal loans need you to be exceptionally punctual when it comes to repayment. On failing to do so, your credit score will be adversely impacted. On the other hand, overdraft accounts allow you to be flexible in repayments. You can stretch your repayment over the duration which comforts you.
The levying of interest starts from the day the amount is disbursed into your account in the case of personal loans. Even if you don’t make use of the funds, you will be charged with interest and have to pay monthly instalments. This is not the case with the overdraft facility as you have to repay only the amount that you have overdrawn and interest will be charged only on that amount. Thus overdraft is way more flexible than personal loans.
iii) The credit score is not hampered on overdrawing multiple times:
If you have availed a personal loan and have closed it, your credit score goes down. To avail another personal loan, you will have to go through the documentation procedure again, which decreases your credit score. On the other hand, the overdraft facility allows you to overdraw multiple times from the same account up to the amount sanctioned for overdrawing.
iv) No foreclosure charges:
If you foreclose a personal loan, then the lender would levy foreclosure charges. It is generally a percentage of the outstanding amount. It varies across banks. In the case of overdraft accounts, there are no preclosure charges. You can fully repay the overdrawn amount without paying any penalties. Also, you need not repay via the EMI route. You can repay how much ever you want at any time.
(SBLC) ALL ABOUT THE STANDBY LETTER OF CREDIT IN 2021
The 𝘀𝘁𝗮𝗻𝗱𝗯𝘆 𝗹𝗲𝘁𝘁𝗲𝗿 𝗼𝗳 𝗰𝗿𝗲𝗱𝗶𝘁 also called SBLC is a bank guarantee document by which the buyer guarantees to his creditor (generally the supplier) that his banking establishment will be able to replace him as debtor in the event of default under reserve that the exporter presents proof of the existence of the debt to the bank.
𝗙𝗶𝗻𝗱 𝗼𝘂𝗿 𝗰𝗼𝗺𝗽𝗹𝗲𝘁𝗲 𝗦𝗕𝗟𝗖 𝟮𝟬𝟮𝟭 𝗴𝘂𝗶𝗱𝗲 𝗼𝗻 𝗼𝘂𝗿 𝘄𝗲𝗯𝘀𝗶𝘁𝗲 :
A firm of consultants and specialists with 20 years of experience in tax optimization, offshore company creation, professional bank account and financial arrangements for investments.
Revolving Credit Facilities | Key Differences | How it Works? | Examples
In this video on Revolving Credit, we are going to talk about What do we mean by Revolving Credit Facilities? Revolving Credit Facility vs Credit Cards – Key Differences, Revolving Credit Facilities Example and many more…
𝐖𝐡𝐚𝐭 𝐝𝐨 𝐰𝐞 𝐦𝐞𝐚𝐧 𝐛𝐲 𝐑𝐞𝐯𝐨𝐥𝐯𝐢𝐧𝐠 𝐂𝐫𝐞𝐝𝐢𝐭 𝐅𝐚𝐜𝐢𝐥𝐢𝐭𝐢𝐞𝐬?
This credit is where the customer pays a committed fees to the financial institute to borrow cash, and then he is allowed to use the funds when needed.
𝐇𝐨𝐰 𝐑𝐞𝐯𝐨𝐥𝐯𝐢𝐧𝐠 𝐂𝐫𝐞𝐝𝐢𝐭 𝐖𝐨𝐫𝐤𝐬?
1. The small company owner will talk to the bank about a credit facility. And then the bank will ask for the mortgage. Here inventories or accounts receivables act as mortgages.
2. Bank hands the company owners a revolving account where there is the perapproved limit.
𝐊𝐞𝐲 𝐃𝐢𝐟𝐟𝐞𝐫𝐞𝐧𝐜𝐞𝐬 𝐁𝐞𝐭𝐰𝐞𝐞𝐧 𝐂𝐫𝐞𝐝𝐢𝐭 𝐅𝐚𝐜𝐢𝐥𝐢𝐭𝐲 𝐯𝐬 𝐂𝐫𝐞𝐝𝐢𝐭 𝐂𝐚𝐫𝐝
There are many differences. Let’s take a look at them one by one –
1. In the case of credit card facility, the person needs to carry it. Whereas in the case of revolving credit facilities, the person doesn’t need to carry any card.
2. The fees charged for revolving credit facilities is less than the fees charged for credit card facility.
3. In the case of revolving credit facilities, the person doesn’t need to make any transaction. Whereas in the case of the person needs to make a purchase.
4. Flexibility in terms of credit is much more in revolving credit facilities than a credit card.
5. He or She can get the money directly into her business account for whatever reason she needs it.
To know more about 𝐑𝐞𝐯𝐨𝐥𝐯𝐢𝐧𝐠 𝐂𝐫𝐞𝐝𝐢𝐭, go to this link here: https://www.wallstreetmojo.com/revolvingcreditfacilities/
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Student Overdrafts – Looking at different Student Accounts 2019 | SaveWithElvs
Part 1 Overdraft 2019: Heading off to university? Still haven’t opened a student bank account? Save With Elvs is here to give you some guidance. I will be explaining what an overdraft is and comparing the overdraft amounts that some of these banks are offering students!
not all UK banks were mentioned in the video
double check deadlines for opening student accounts
For Business Enquires Only:
Music licensed to Creative Commons
no copyright intended
What is an overdraft? | Banking Products | HSBC UK
A quick guide to overdrafts, the types of overdrafts and how they work.
Learn more at https://www.hsbc.co.uk/currentaccounts/products/overdrafts/overdraftsexplained/
HSBC UK serves personal and business customers, offering a breadth of banking solutions, including bank accounts, loans, credit cards, mortgages, insurance and investment products, to name a few.
For more information, visit:
Banking 101: What is Overdraft and Overdraft Protection? Easy Peasy Finance for Kids and Beginners
This video answers “What is Overdraft and What is Overdraft Protection” in a simple, kidfriendly way.
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The video addresses the topics below:
What is Overdraft
What happens in case of an overdraft are you allowed to withdraw the money
What is overdraft protection
Do banks charge any overdraft protection fee
What is the advantage of overdraft protection
Are there any disadvantages of overdraft protection
Is there any alternative to overdraft protection
Hope you like the video and stick around for more finance fun! And please let us know your thoughts (or a suggestion for a video) by leaving a comment!
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For more information and transcript, please visit: http://www.easypeasyfinance.com/whatisoverdraftandoverdraftprotection/
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What is the difference between an overdraft and a line of credit?
Valiant Finance cofounder, Alex Molloy, compares the differences between a bank overdraft and a line of credit. Both options are great for shortterm working capital needs for a variety of businesses.
To get your tailored business loan options in under 2 minutes, visit the Valiant website at: https://valiant.finance/
U.S. Bank Asks: What’s an overdraft?
Real students are interviewed about their understanding of overdrafts and given tips on how to manage their money to avoid over drafting.
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