Economic downturn has come in the country due to the lockdown caused by the pandemic Coronavirus. Many people have lost their jobs due to lockdown, while many people have been cut in salary. In such a situation, cash holders can opt for overdraft instead of FD. It is available at a lower rate of interest than a personal loan.
For your information, let us tell you that you can withdraw from the lender 85% to 95% of the fixed deposit value in the overdraft facilities in lieu of fixed deposits. The bank charges interest only on the actual amount withdrawn from the overdraft, but not on the full limit of the overdraft. You get one to two percent more than the fixed interest rates on fixed deposit investment. Suppose you have an FD of Rs 1 lakh with a maturity period of three years with 5.75 per cent interest of HDFC Bank. The bank is giving an overdraft limit of 85 per cent on this FD i.e. Rs 85,000. You withdraw Rs 50,000 from the overdraft limit in lieu of this fixed deposit. So the interest will be payable only on the amount of Rs 50,000 and not on the entire Rs 85,000.
At which the interest rate charged will be two percent more than the fixed deposit rate. So you have to pay interest of 7.75 (5.75 + 2) per year. The overdraft limit for FDs and interest rates can vary from bank to bank. If the overdraft facility in lieu of fixed deposits is used wisely, you can smartly deal with your short term financing needs without cashing in on fixed deposit investments. So if you are a person who has been affected by the corona epidemic and unfortunately has left your job, then an overdraft will help your short-term money needs in exchange for a fixed deposit.
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