An overdraft facility offers flexible access to extra funds, giving account holders a financial cushion when unexpected expenses arise. With a pre-set limit based on the customer’s credit profile, users can access funds beyond their account balance, paying interest only on the overdrawn amount. This flexibility often makes overdrafts a preferred solution for short-term needs. Unlike traditional loans, overdrafts require no collateral and don’t enforce fixed repayment schedules, enabling easier cash flow management. Many banks also offer overdraft protection, which helps prevent declined payments or fees by covering shortfalls with funds from a linked account. However, customers should be mindful of interest rates and fees, especially in cases of unauthorized overdrafts, where costs can quickly add up.
