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Overdraft

Overview

Allows you to draw additional funds quickly and conveniently from your current account when you require it. Raising additional Capital for running a business or making investments is now fast, simple and convenient.

 

Here's what Overdraft offers you:

  • No fixed repayment schedule.

  • Interest charged only when funds are used.(However, will charge you 1% p.a. commitment fees on the unused amount)

  • Easy to use

Maximum Limit Amount          

RM50,000 - RM1,000,000

Repayments                              

No fixed repayment schedule, normally is yearly review.

Interest Rate                          

BLR+ (7% - 10% p/a)

Speed                                      

3-4 Weeks

 

How Does Term Loans Work

An overdraft facility allows you to write cheques or withdraw cash from your current account up to the overdraft limit approved. It is a short-term (usually up to 12 months) standby credit facility which is usually renewable by doing review on a yearly basis. It is repayable on demand by the bank at any time.

Interest is charged based on the amount of overdraft used and is calculated on a daily basis. It is debited from the account at month-end. If interest is not paid, it will be accumulated as part of the principal and rolled over to the next month.

Whatever amount you repay into the overdraft account can be withdrawn again as long as the total outstanding amount is within the overdraft limit granted. This is why it is called a “revolving credit facility”.

An overdraft facility is not subject to any repayment as long as the amount used is within the overdraft limit. But, it is repayable on demand by the bank at any time.

There are no minimum monthly repayments for an overdraft facility as long as the amount you owe is within the credit limit. But, if the account goes into “excess” you need to repay the excess amount immediately.  If the excess is not paid immediately, the bank can stop the overdraft facility and require you to repay the full outstanding amount within a given time. If the bank recalls your overdraft facility, your credit record will be adversely affected.

An overdraft facility can be granted on a secured or unsecured basis.

A secured overdraft is one where you pledge an asset to the bank as security. The asset could include deposits in the bank, property or shares.  If the bank stops your secured overdraft facility and you are unable to repay your debt, the bank has the right to sell your pledged assets to recover what you owe it. If the proceeds are not enough to recover your debt, you are still liable for the difference.

An unsecured overdraft facility is one where no assets are pledged as security. 

COST

 

The overdraft limit is the maximum amount that you can overdraw. You pay interest only on the amount that you overdraw. Interest is calculated on the daily balance overdrawn and debited to the account monthly. Any unpaid amounts of interest are added to the overdrawn amount in the following month. The interest rate on an overdraft account is usually charged at a percentage over the bank’s base lending rate (BLR), for example, (BLR) + 2% per annum.

Cheque book charge - Some banks charge for the cheque books issued to you.

 

Returned cheque charge - When you issue a cheque that will cause the outstanding amount in your account to exceed the overdraft limit, your account will go into “excess”. The bank can return your cheque because you have insufficient funds in your account. When this happens, a “returned cheque charge” will be levied on you. In addition, the bank will charge penalty interest on the amount of the excess.

 

Penalty interest - When your account goes into “excess” and the bank approves the excess, the interest rate that is charged on the excess amount is usually higher than the agreed rate. This higher rate is normally called the “penalty interest” rate.