Business requires a large amount of funding on and off to sustain and flourish in this competitive business world. There are quite a few financial products available in the lending market which can be availed by the businesses to meet their long and short term requirements. Business loan, overdraft facilities, and loans against property are the most sought after business finance options. The new entrant in the lending sector is the dropline overdraft loan which encompasses the goodness of a business loan and overdraft facility. Before one opts for it, it is very important to understand all the know-how about it.
WHAT IS A DROPLINE OVERDRAFT?
Before understanding what is a dropline overdraft, let’s recapitulate about the business loan and an overdraft facility. A business loan is a long term secured or unsecured loan which incurs a rate of interest and comes with a defined loan tenure and repayment schedule. An overdraft, on the other hand, is a short term financing option that can be availed by the businesses having their current account with the bank wherein they can withdraw more than their balance and the interest is charged on the overdrawn amount only.
Dropline Overdraft is secured in nature and can be availed for long tenures. Unlike normal overdrafts, there are only one-time processing fees that are incurred and there is no need for frequent renewals that are required. This credit facility can be availed against collateral which can be a stock, property, insurance policy, machinery, etc. Some lenders also offer the dropline overdraft facility without the requirement of any collateral only when you have exceptional credit credentials.
Using a dropline overdraft loan, one can avail 50-80% of the market value of the property as the loan amount and the interest will be charged on the amount you actually use. The loan amount is reduced from time to time from the principal.
WHY SHOULD I OPT FOR A DROPLINE OVERDRAFT?
Dropline overdraft is a great credit facility option which blends the best of business loans and overdraft facility. Here are some reasons on why these are excellent for meeting out business expenses.
Interest: Unlike the business loans wherein the interest is charged on the sanctioned loan amount, herein the interest is charged only on the amount which you use.
Loan Amount: Dropline overdraft loans are excellent for availing higher loan amounts ranging from up to Rs. 20 lakhs to Rs.100 crores. The value of the property and your income stats are taken into consideration.
Easy repayment: Dropline overdrafts can be availed for long tenure up to 10 years. One can easily chart out the repayment plan in a flexible manner as per his income and earnings.
Fast processing: One can avail fast processing of dropline overdraft loan if one applies through online portals like that of LoansJagat.
IMPORTANT POINTS TO REMEMBER WHILE AVAILING DROPLINE OVERDRAFT
Since the dropline overdraft is a new credit facility, it is important to keep a few points handy while applying for one.
- Clarity: The borrower must clearly tell the bank why she/ he is opting for the dropline overdraft facility. The other important factor is to keep all the requisite documents handy sp as to ensure quick approval.
- Financial position: Dropline overdraft is like a loan that needs to be repaid to the lender. Thus, before opting for one it is very important to calculate your present financial obligations so as the loan doesn’t end up like a burden. Check for your ongoing loans and the EMI and based upon your income whether you will be able to repay it or not.
- Credit Ratings: Be wary of your creditworthiness and check for your credit score and credit rating. All the lenders check for one’s credit ratings to check for the current liabilities of the borrowers.
- Agreement terms and conditions: While opting for a dropline overdraft, it is the borrower’s responsibility to read the terms and conditions of the agreement thoroughly and if need be get the doubts cleared about the late payments, or pre-closure charges beforehand.