A personal loan overdraft facility is a loan that allows you to withdraw funds up to a limit pre-approved by the lender. Unlike traditional loans that give you a lump sum amount, this facility is more akin to a line of credit: you borrow funds when you need them, within the limits agreed upon, and pay interest only on the sum actually drawn.

Key Features Personal Overdraft Loan

1. Flexible Borrowing Limits

The flexibility in borrowing limits makes a personal overdraft loan one of its most appealing features. An overdraft amount is typically determined by lending banks or financial institutions based on the applicant's income and credit stature as well as their past financial history. This allows the applicant to conveniently withdraw funds as and when required without going through the whole traditional loan application process. 

2. Interest on Used Amount Only

In contrast to traditional loan facilities, where the borrower pays interest on the entire amount loaned, in the case of the personal loan overdraft facility, interest is charged only on the actual amount taken out. This will ensure that extra costs for sums not actually borrowed do not apply, making it a viable option.

3. Quickly Accessible Money

In cases where one is in dire need of funds, personal overdraft loans are lifesaving. Unlike conventional loans, overdraft facilities provide access to cash within a very short time. The speed of this type of loan makes it applicable in emergencies or wherever quick liquidity is required. 

4. Revolving Credit Facility

The personal loan overdraft facility is based on a revolving credit system. When you repay the amount borrowed, the amount equalling your repayment gets added back to your limit. This allows you to borrow repeatedly in the limit as long as the overdraft exists. It adorns complete freedom.

How to Apply for a Personal Loan Overdraft Facility

1. Eligibility Criteria

Most banks and financial institutions have sets of eligibility criteria before issuing personal loan overdraft facilities. These may typically include minimum monthly income, good credit score (that is, generally above 650), and stable employment history. Please check with the particular lender for its fine print on eligibility requirements.

2. Documentation Required

Generally, you are expected to provide the following documents to apply for an overdraft facility:

• Identity proof: Aadhaar card, passport, voter ID, etc.

• Proof of address: Utility bills, bank statements, etc.

• Income proof: Salary slips, bank statements, etc.

Employment details (for salaried individuals) or business documentation (for self-employed).

3. Approval and Disbursement

Once your application has been reviewed and approved, the bank shall set an overdraft limit against which you can draw within that limit. The approval procedure is relatively quick, and the funds are directly made available either through a dedicated account or a linked credit card.

Benefits of the Personal Loan Overdraft Facility

1. No Fixed Repayment Schedule

The flexible repayment scheme is perhaps one of the biggest advantages of a personal loan overdraft facility. This allows you to return the amount borrowed when your finances permit. This gives you much more flexibility than a conventional personal loan.

2. Convenience and Flexibility

An overdraft facility allows you to obtain funds whenever you require them most without the necessity to make further applications time and again. This ability to withdraw funds in such flexible terms is something that a conventional loan cannot provide.

3. Lower Interest Charges

You may enjoy savings on interest charge, as interest is applied only on the amount utilized. If you are cautious about the extent of your borrowing, you will be able to manage the facility of overdraft and thus incur low-interest charges.

Conclusion

An excellent financial tool with flexible nature and rapid access to finance, the personal loan overdraft facility is best suited for individuals needing immediate assistance. It offers low-interest rates and withdrawal limits on the amounts borrowed whenever required, making it an excellent compliment for traditional loans. Proper management, as with any other financial product, is required to avoid accruing high-interest charges or overspending.