When it comes to money, words like interest, investment, and credit are all associated with it. People want consistency with their security. By that, they work not only in saving cash but in investing their money as well.
One thing people should know is how an overdraft facility in Malaysia works. To know and understand more about what overdraft is and how it helps you with your future, here is an article which you must read on.
Understanding What an Overdraft Facility Is
An overdraft facility permits to write cheques and even to withdraw money right from your current count and up until the overdraft limit is permitted. This is short-term which could last for around a year. It is even renewable based on a yearly basis and is repayable by the bank’s demand.
The Overdraft Facility Limit
When it comes to the overdraft’s limit, this goes on to the maximum amount you can overdraw. You have to pay interest only on that specific amount you overdraw. As for the interest, this is calculated on your daily overdrawn balance and is debited to your monthly account. Whenever there are unpaid amounts of interest seen, those are then added to the amount of your overdraw right to the following month. As for the amount’s charge, this is usually taken at a percentage of the prime lending rate of the bank.
Different Types of Overdraft Facilities
There are two basic types of overdraft facilities. These are known as:
o Secured Facility
When talking about a secured overdraft facility, this is where you can pledge an asset right to the preferred bank as security. This includes deposits for your shares, properties, and bank. Whenever the bank stops your secured facility or that you find it hard to repay your debt, then the bank may sell your vowed assets to recover all the amount you owe to them.
o Unsecured Facility
The unsecured facility is where no assets are linked here for security. With this type, banks are only allowed to grant unsecured debit four times to the person’s monthly income. This includes credit cards being granted with their credit and some other unsecured credit facilities.
The Need of Getting an Overdraft
Specifically, an overdraft is still a debt. This is because you are using cash which you have loaned from a preferred bank. Overdrafts are extremely useful for people who seriously need money. With this, it is best to consider an arranged overdraft so to avoid fees from any bounced bill payments whenever your account provides no more money. Also, overdrafts can be used as an emergency fund.
Using the Right Account
It is important to use the right account when getting an overdraft because this is the most costly way to borrow money, especially when using it for long-term. To help you with this, there are websites which can provide you comparisons regarding these accounts where each are explained on how they can answer your needs.
You have to keep your eyes on your accountability if you want to borrow money from a bank. And with this, being a responsible borrower can bring the bank’s trust so you can be helped out for more in the future. But of course, lenders should not only be reliable, accountable, and trustworthy, but they should also be disciplined and timely.