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Question
Distinguish between the following:
Loan & Overdraft
Solution
| Basis of Difference | Loan | Overdraft |
| Meaning | In the case of loan, a certain amount is advanced for a specific purpose and a specific period. |
It is a facility given to a current account holder to withdraw amount more than what he/she has in his/her account. |
| Eligibility | Any account holder can get a loan from a bank. |
Only current account holders can enjoy this facility. |
| Rate of interest | Comparatively low interest rate is charged. |
A high interest rate is charged. |
| Duration | It is meant for a long period. |
It is meant for a short period. |
| Amount | The amount given as a loan is high. |
The amount of an overdraft is comparatively smaller. |
| Separate account | Separate account is required. |
Separate account is not required. |
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