Over Draft Loans


1. Loan arrangement under which a bank extends credit up to a maximum amount (called overdraft limit) against which a current (checking) account customer can write checks or make withdrawals. ... Also called bank overdraft.

2. Balance of a bank account in which funds withdrawn have exceeded funds deposited.An overdraft facility allows the facility holder to withdraw money from the account despite having no balance.An overdraft can help reset a skipped cycle of rotation of inflow and outflow of cash. In other words, if sales proceeds and purchases result in a flow of money in and out many times during a week/month; an overdraft facility allows managing cash flow gaps that might arise due to timing mismatch.