Interest will be charged only on the amount you spend, there is no prepayment penalty if you repay it on time; half of India is unaware of this loan.

When you take a loan from the bank, interest is charged on the entire loan amount. But there is also a loan in which no matter how much amount is approved for you, interest will be charged only on the amount you have spent. Not only this, but this loan is better than a personal loan in many ways because there is no hassle of processing fees and prepayment penalty in it. Most people do not know about this loan from the bank. Know about it here.

We are talking about salary overdraft facility. Overdraft is a type of loan, which you can also get on salary account. Under this, you can withdraw more money from your salary account at the time of need. Even if there is no balance in your account, you can withdraw money from the account.

For overdraft facility, you have to mortgage your FD, shares, house, salary, insurance policy, bonds etc. If you are unable to repay the amount, then it is compensated by your mortgaged thing. But if the overdrafted amount is more than the thing mortgaged by you, then after compensating from the mortgaged thing, you will have to pay the remaining amount.

You also get the facility of overdraft on salary. This is called salary overdraft. Under this facility, you can take about two to three times the amount of your salary from your account as a loan from the bank. However, every bank has its own rules regarding salary overdraft. Some banks give only 80 to 90 percent of the monthly salary as a loan. The loan limit depends on the customer's credit history.

To repay other loans, you have to pay EMI every month. But there is no hassle of paying EMI every month in this. You can repay the loan amount anytime within the stipulated period. However, you have to pay interest every month.

If you take a personal loan, interest is charged on the entire loan amount. But as an overdraft, interest is not paid on the entire amount approved by the bank. The interest is charged only on the amount you withdraw from your account for expenses. That means if you get Rs 1 lakh as overdraft, but you spend only Rs 50,000 from it, then interest will be charged only on Rs 50,000.

If you repay before this stipulated time, then you have to pay a prepayment charge. But there is no charge in the overdraft facility. Apart from this, interest has to be paid for the same period for which you have the overdraft amount.