Cash Credit Limit , Overdraft Facility

Cash Credit Limit , Overdraft Facility

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Cash credit is a prearranged like loan, so through that a customer can withdrawmoney up to a maximum amount..that max amount is called limit. Overdraft is additional facility given in a current account where the customer can withdraw amount more than the balance he has in his account.

At the simplest level, cash credit and overdraft are just forms of borrowing. An institution allows you to withdraw funds that you do not have, usually in small amounts. The primary difference between these forms of borrowing is how they are secured. Business accounts are more likely to receive cash credit, and it typically requires collateral in some form. Overdrafts, on the other hand, allow account holders to have a small negative balance without incurring a large overdraft fee.

Cash Credit

Cash credit is more commonly offered to businesses than individuals. It requires that a security be offered up as collateral on the account in exchange for cash. This security can be a tangible asset, such as stock, raw materials, or another commodity. The credit limit extended on the cash credit account is normally a percentage of the value of the collateralized security.

Overdraft

The two most common types of overdrafts are a standard overdraft  and a secured overdraft account that loans cash against various financial instruments.A standard overdraft is the act of withdrawing more funds from an account than the balance normally would permit.