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Personal loan overdraft allows you to avail extra funds to overcome the unforeseen expenses and manage urgent cash flow situations. Similar to regular overdraft facility, this credit product also permits you to pay the interest only on the utilized amount and not on the entire sanctioned limit.
As personal loan overdrafts and regular personal loans are almost similar credit facilities offered by financial institutions. Therefore, if you are finding it difficult to avail personal loan overdraft for any reason, you can conveniently apply online for a regular personal loan on Paisabazaar at an interest rate starting from 10.50% p.a. for loan amounts up to Rs. 40 lakh from leading banks and NBFCs.
How Does a Personal Loan Overdraft Facility Work
Personal loan overdraft facility allows you to withdraw funds whenever you need and is linked to your savings/current account. Usually, the lending bank sanctions a loan limit in the form of overdraft and not as a lump sum amount in the borrower’s bank account. It is almost similar to regular personal loan but offers more flexibility in terms of repayment and usage.
Know How It Works:
Based on your eligibility and financial requirements, you apply for a personal loan overdraft from the respective lending institution.
You can withdraw funds from the sanctioned limit assigned as a personal loan overdraft, over and above your bank balance.
The amount you overdraw is considered as a personal loan and the interest rate is charged only on the utilized amount and not from the total assigned overdraft limit. You can even overdraw multiple times from the total OD limit.
Features of Personal Loan Overdraft
Personal loan overdraft is a flexible credit product that comes with no end-use restriction besides speculation at your disposal to meet your financial requirements. Find below the key features of personal loan overdraft facility:
Loan Type: Overdraft facility against personal loan limit
Credit Limit: Based on your income, credit profile, employment stability and relationship with the lending bank
Usage: Can withdraw funds multiple times for the assigned amount limit
Interest rate: Charged only on the utilized amount from the total sanctioned limit
Repayment tenure: Usually 12 months and may be renewed annually
Pre-payment/Foreclosure Charges: Nil
Flexible repayment structure with no fixed EMIs
Eligibility Criteria
The eligibility criteria of regular personal loan and personal loan overdraft is almost similar. Find below the basic eligibility criteria for availing a personal loan overdraft facility set by most banks and NBFCs:
Age Requirement: 21 – 65 years (varies as per lender)
Employment Type: Salaried Individuals and self-employed professionals and non-professionals; and central/state/local government employees.
Income: Stable and regular source of income with minimum monthly salary requirement as set by the lender.
Credit Score: Ideally, 750 or above preferred by most banks
Bank Account: Applicant should have an existing bank account with the lending bank
Comparison of Personal Loan Interest Rates (Term Loan vs Overdraft Facility against Salary)
| Banks/NBFCs | Interest Rates (p.a.) | |
| Personal Loan | Personal Loan Overdraft Against Salary | |
| ICICI Bank | 10.85% to 16.65% p.a. | 12.35% to 14.10% p.a. (FlexiCash) |
| HDFC Bank | 10.90% to 24% p.a. | 15% to 18% p.a. |
| Kotak Mahindra Bank | 10.99% to 16.99% p.a. | 13.50% p.a. onwards |
| Axis Bank | 11.25% to 22.00% p.a. | 16% to 19% p.a. (FlexiCredit) |
Note: Rates as of 16 May 2025.
Documents Required for Personal Loan Overdraft
For a Personal Loan Overdraft Facility, banks/NBFCs generally require a specific set of documents to assess the applicant’s eligibility that shall vary as per the lending institutions, which are as follows:
- Identity Proof: Aadhaar Card, PAN card, Voter ID, Driving License, Passport
- Address Proof: Passport, Voter ID, Aadhaar card, Utility Bills (Water, Gas, Electricity), Rent agreement (if applicable)
- Income Proof: Latest salary slips, bank statements, Form 16
- Employment Proof: Company ID card, appointment letter, offer letter
FAQs on Personal Loan Overdraft
What is personal loan overdraft?
Personal loan overdraft is a credit facility offered by bank and financial institutions that permits you to withdraw funds up to a pre-approved limit. You pay interest only on the utilized loan amount from the assigned limit and can be withdrawn multiple times.
Which is better, personal loan or OD?
Both of the credit products provide you access to avail funds at times of need and come with almost the same nature and features. All it depends on your financial requirements and repayment ability to use and repay the funds. Personal loan is disbursed in the form of a lump sum amount, whereas overdraft is a credit limit sanctioned based on your income, credit profile, employment stability and relationship with the bank.
What is the eligibility for a personal loan overdraft loan?
The eligibility criteria of personal overdraft is similar to regular personal loan, wherein the age of the applicant is usually 21 to 65 years. The salaried and self-employed individuals are eligible to apply for personal loan overdraft with regular income with stable job or business. Ideally, your CIBIL score should be 750 or above with stable and continuous source of income to be eligible for a personal loan overdraft.
What is the purpose of personal loan overdraft?
The primary purpose of personal loan overdraft is to meet urgent or unforeseen financial requirements. Personal loan overdraft is mainly used to have access to short-term funds to meet immediate expenses.
What is overdraft for salaried, and how can salaried individuals avail this facility?
Overdraft for salaried is a credit facility offered by banks and financial institution that allows salaried individuals to withdraw funds beyond their bank account balance up to an assigned credit limit.
What are the types of personal loan overdraft facilities?
The personal loan overdraft facility comes in various types, such as salary overdraft (linked to bank’s salary accounts), unsecured (no collateral required), secured (requires collateral, such as assets, FDs), and pre-approved personal overdraft issued to eligible bank’s customers.