All You Need to Know About Overdraft Loan for Salaried & Its Benefits

  • Published on: 13 Jun 2024
All You Need to Know About Overdraft Loan for Salaried & Its Benefits

The option of an overdraft loan for salaried professionals is ideal if you want to get instant funding. Using this type of credit, you can manage any medical emergency or any other urgent requirement.

It helps you avoid cutting back on your budget or liquidating your valuable assets to arrange funds. Read on to know how salary overdraft works, its features, benefits and more.

How Does Salary Overdraft Work

The overdraft loan for salaried individuals is a revolving credit facility offered by banks that allows you to borrow funds with your salary as collateral. By opting for this, you can withdraw a pre-approved amount from your salary account without applying for a separate loan. 

Once you have withdrawn the amount, it will attract interest daily, which you must pay on a monthly basis. You can repay the loan at your convenience, as no fixed EMIs exist. Thus, getting a loan on a salary account gives you the flexibility to make part payments or a full payment according to your budget. 

Features of Loan Against Salary Account

Here are some characteristics of this form of credit.

  • Eligibility Criteria

To be eligible for a salary overdraft, you only need a salary account with the bank. Since banks have all your personal and credit information, they can evaluate your creditworthiness to decide your withdrawal limit. 

  • Overdraft Limit

This is the amount you can withdraw over your account balance in case of urgent requirement. These criteria vary from one bank to another. Some allow you to withdraw up to 3-5 times your monthly salary, while others may offer you a loan up to a fixed amount. 

  • Interest Rate

The interest on an overdraft loan for salaried individuals applies on a daily basis. From the day you make a withdrawal, it starts attracting interest until you’ve paid the complete amount. 

  • Collateral Required

Your salary acts as collateral in this case, so you don’t have to pledge any valuable asset to get approval.

  • Revolving Credit 

Once you have paid the loan amount, you can renew your loan for the same amount if needed. This way, salary draft is a convenient option available 24/7. 

  • Tenure

The tenure may range from 12 months to 5 years, depending on the bank’s internal policy. This allows you to repay the loan when you have the funds available. 

Reasons to Opt for It

Here are some reasons for getting an overdraft loan for salaried professionals.

  • It is easily accessible via your salary account
  • It doesn’t require a lengthy application or documentation process
  • It offers a flexible repayment schedule 
  • You have a better chance of approval as your bank already has all the required details  
  • You can pre-close it anytime without penalties
  • The interest is charged only on the amount you withdraw

In addition to that, here are some drawbacks of this loan facility

  • The interest rate is higher than any other type of credit, like a personal loan 
  • You need a good credit score to get approval 
  • The interest calculated daily may lead to a higher debt obligation 
  • It does not improve your credit score like a traditional loan

Knowing all the fundamentals of this instant credit facility is one way to source instant funds, but you must have a salary account. Alternatively, you can apply for the Fibe Instant Personal Loan to arrange up to ₹5 lakhs for any personal use. 

We offer a loan at a fixed nominal interest rate, making repayment easy. Unlike traditional loans, you don’t need to have a high credit score as we opt for alternative credit scoring mechanisms. 

So, even if you are new to the credit world, you can still avail a sizeable loan as per your eligibility. With nominal paperwork, comfortable tenure of up to 36 months and zero foreclosure charges, you can borrow stress-free. Download our Personal Loan App or visit our website to apply online. 

FAQs on Salary Overdraft

What is the OD limit for salaried people?

The amount of loan on a salary account depends on the lender’s policy, your salary and your credit history. When you open a salary account, banks calculate your overdraft limit based on the withdrawn salary. Often, you can withdraw a percentage of your current salary amount as an overdraft.

What is a salary advance overdraft?

It is a short-term instant credit facility offered by banks against your salary account.  

How is the salary OD calculated?

Some banks allow you 80%-90% of your net salary as a loan. Others may calculate your loan amount up to 3 times your monthly salary as the maximum loan amount.

Is salary overdraft good?

An overdraft loan for salaried individuals is a smart option when you need funds instantly without going through a time-consuming loan application process. But you may not get sufficient funds for a significant loan repayment and it may attract a higher interest. Based on the maximum loan amount you can get and your financial requirements, you can make an informed decision.


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