bank overdraft question

aj7861

for the advantages i need to know a couple of things

1) it is flexible and efficient but why?

2) relataively easy to increase limit but how?

please help

thank you

Peter W

1. It is flexible due to the way that you can repay any amount of the overdraft, and then draw on it again, at any time without having to agree it with the bank. It is efficient in that you only have to pay interest on the amount of the overdraft that you are using at any time, instead of on the whole balance of a fixed loan, which you might not need to use.

2. Just apply to the bank for a higher limit.

aj7861

Peter W wrote: »

1. It is flexible due to the way that you can repay any amount of the overdraft, and then draw on it again, at any time without having to agree it with the bank. It is efficient in that you only have to pay interest on the amount of the overdraft that you are using at any time, instead of on the whole balance of a fixed loan, which you might not need to use.

2. Just apply to the bank for a higher limit.

bit more explaining on the 2nd point please:001_smile:

Peter W

aj7861 wrote: »

bit more explaining on the 2nd point please:001_smile:

Well, an HSBC customer might apply using the options available on this screen.

blobbyh

Don't forget however that an overdraft can be called in/cancelled on demand meaning you may run out of liquidity. Being unexpectedly forced to repay the funds could in turn jeopardise the trading future of the business as happened in the infamous collapse of Farepak a couple of years ago..

In the current climate, an overdraft might be hard to increase due to the credit contraction being exercised by the banks who are more concerned about their own liquidity rather than that of their customers...

Oops, sorry just read you were only after advantages!