Dropline Overdraft Facility

Dropline overdraft facility combines essential features of term loan and overdraft. It serves as in reducing your limit each month as a facility provided in term loan and interest is only payable on amount utilized. It is much beneficial in comparison to Cash credits and even term loan facilities.

Comparing to term loan. – term loan will be most useful when the funds which you are procuring has a definite end use and all funds asked will be used at once eg for purchase of machinery. So, in TL if you have taken a 1cr loan for tenure of 10 years, you will have to pay specific EMI for same. But when you do not have specific end use or you are taking the loan as a safeguard for contingent or emergency requirements, Dropline overdraft will be of your use.

It works as : Suppose you have been provided a limit of RS 120 lacs for tenure of 120 months, then each month RS 1 lac (ie Rs 120 lacs / 120 months),will be reduced from your drawing power and you will have to pay interest of only utilized amount. It is mostly against collateral and a beneficial option.