How to Calculate a Bank Overdraft

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Conclusion Loan against a bank fixed deposit may not be as useful. If you are not yet a Citibank Suvidha Salary Account customer, you can apply for Ready Credit facility along with a Suvidha Account.

It's on your bank statement can't be more than Overdraft Limit. Founder, ExcelUser Sep 11, 2013 Robert, Let's take an example. We will also see if it makes sense to go for such loan. Or go to the for more information and preferences.

Calculating How Much That Overdraft Will Cost

Looking for a short term loan to fund an emergency in the family. Among various ways to raise short term debt, a loan against your existing fixed deposit might just overdraft interest calculator one of the quickest. In this post, I will discuss loan eligibility, interest rate and pros and cons of such loans. We will also see if it makes sense to go for such loan. How Much Loan Can I Get. The exact percentage may vary across banks. For instance, offers overdraft facility up to 85% of value of your fixed deposit. What Is the Rate of Interest. The rate of interest is 1-2% above the rate of fixed deposit. Axis Bank charges 2% above the deposit rate. What Is the Loan Tenor. How Is the Loan Repaid. The bank may have additional internal restrictions on loan tenor. Repayment schedule or method can vary across banks. You must verify the repayment method before taking the loan. It depends on the type of credit facility too. With overdraft facility, you may get credit line on renewable basis. You merely need to keep paying interest. You can close the loan whenever you wish. Since the bank owns the deposit, it merely needs to mark a lien on the fixed deposit to create security. However, you are advised to verify this information with your bank. You may get the liberty to make principal repayment as and when your cash flows permit. With Axis Bank and State Bank of India, the minimum loan amount overdraft interest calculator Rs 25,000. Does Loan Against Fixed Deposit Make Sense. You have at least two options. And the difference is not just 2%. There is no tax benefit for repayment of loan against fixed deposit. So, the true comparison is 5. This is for a person in 30% tax bracket. Another point to consider is the applicable penalty for premature exit from fixed deposit. There may be additional penalty as mentioned in terms and conditions of your fixed deposit receipt. However, the penalty is only limited to interest and not the principal. Many times, I get the argument along this line. These days, rates are not as high. Rather, break your fixed deposit and use the funds to meet your requirement. Even though I have argued above that you must not opt for loan against fixed deposit because you pay more than you earn, taking a loan might be a better idea in specific scenarios. Suppose you opened a fixed deposit of Rs 10 lacs for 5 years at 9% p. The fixed deposit is with annual payout and not cumulative. After 2 years, you need a loan of only Rs 2 lacs. Considering income tax rate of 30. In this case, you will have to take loan say, overdraft facility of Rs 2 lacs. For a loan of Rs 2 lacs at 11% p. Hence, your net income is Rs 2. Secondly, consider penalty of premature withdrawal at 1%. Hence, the rate becomes 6. You will earn interest of Rs 1. Post-tax, this income becomes Rs overdraft interest calculator. You will earn interest income of Rs 1. Total post-tax interest income of Rs 2. You can see you are better off continuing with this fixed deposit and taking a loan to bridge the short fall. Do note I have chosen this case to highlight this scenario. Conclusion Loan against a bank fixed deposit may not be as useful. In most cases, you may be better off breaking the fixed deposit rather than taking a loan against it. However, there might be specific scenarios where taking a loan might be a better idea. A simple spreadsheet analysis will tell you what to do.

The exact percentage may vary across banks. Suppose you opened a fixed deposit of Rs 10 lacs for 5 years at 9% p. If you don't have a Citibank Suvidha Salary Account, you can apply for one along with a request for Ready Credit. You will earn interest of Rs 1. All overdrafts are always repayable on demand, including any fees or charges. The rate of interest is 1-2% above the rate of fixed deposit. In such cases, the account holder is supposed to clear the Ready Credit outstanding.