LoansFinancial Glossary
Overdraft
Definition
A credit facility linked to your bank account that allows you to withdraw more than your available balance, up to a pre-approved limit. Interest is charged only on the amount overdrawn and for the duration it is used. Overdraft can be secured (against property, FD, or shares) or unsecured.
Why It Matters
An overdraft against property (OD-LAP) is increasingly used as a smart alternative to a regular home loan. You park your salary in the OD account, reducing the outstanding balance and saving interest. When you need money, you simply withdraw. Effective interest savings can be 1-2% per year compared to a regular home loan.