What Is Overdraft

Each entity deals with settlement transactions. But, what to do if revenue has not arrived yet, and suppliers require payment without delay? In this case the overdraft will become an excellent decision.

In other words, the overdraft is a credit which is taken in case of a lack of money on the account for carrying out due payments.

There are some types of the overdraft. The first: a credit without pledge is called “blank overdraft” and mortgage credit which can be a real estate, car, deposit, equipment, etc.

Under various conditions of provision of the overdraft it is subdivided on “standard”, “advance”, “technical” and “under collection”.

Let’s consider each option. The advance overdraft is certain cunning of the bank necessary to attract the client on settlement and cash servicing. Under collection – it will be convenient to those whose most part of revenue represents the collected money. Technical overdraft is offered to clients under warranty payments. It can be deposits, sales proceeds at the exchange or other.

It is necessary to consider settlement methods. Options of tranche or credit line are possible. There are differences between tranche overdraft and standard one. In case of the tranche credit settlement by parts is possible. In case of the overdraft on “credit line” there is no restriction of a repayment period and the credit can be not nullified before the termination of the agreement.

The limit for the overdraft is determined by the bank for each client individually. Thus, the set of factors is considered.

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