Advertisements
Advertisements
Question
Distinguish between the following:
Loan and overdraft
Solution
| Loan | Overdraft |
| Any account holder (i.e., current, savings or fixed deposit), or any other person can get a loan facility. | Only current account holders are eligible for an overdraft facility. |
| Bank opens a separate account for the amount of the loan and the borrower Withdraws from this account. | Bank allows the account holder to overdraw (i.e., draw in excess of his balance in his account) from his existing Current Account. |
| The purpose of the loan is to provide finance for some project or expansion of the business. | The purpose of an overdraft is to meet working capital requirements. |
| A loan is sanctioned for a relatively longer period such as 3 years, 5 years, or even more. | Overdraft is generally sanctioned for a short duration such as 1 month, 2 months, etc. |
| Interest is calculated on the sanctioned amount and the rate of interest is a little higher than that of overdraft | Interest is calculated on the amount actually withdrawn and the rate of interest is lower than that of loan. |
| The loan amount has to be repaid fully on the due date or it is repaid in suitable installments. | The overdraft amount is gradually reduced with the deposits made in the current account. |
APPEARS IN
RELATED QUESTIONS
Select the correct answer from the options given below and rewrite the statement.
A company usually opens _____________ account in a bank.
Write a word or a term or a phase which can substitute the following statement:
The slip which is used for withdrawing money from Savings Account.
Write a word or a term or a phase which can substitute the following statement:
Negotiable Instrument which can be discounted with the bank.
State whether the following statement is true or false :
Joint Stock Company opens Current Account.
State whether the following statement is true or false :
In cash credit, customers account is credited by bank with sanctioned amount
State whether the following statement is true or false :
Overdraft facility is granted to Savings account holders.
Find the odd one:
Complete the sentence:
Accepting deposits and lending money are the primary functions of ______
Complete the sentence:
A facility under which a customer can overdraw money from his account is called as ___________.
Answer in one sentence:
What is a Letter of Credit?
Justify the following statement:
Overdraft facility is given only to current depositors?
Justify the following statement:
There is a difference between Loans and Advances given by the Bank.
Explain the different types of deposits
Explain the following term/concept:
Recurring deposits
Explain the following term/concept:
Time Deposits.
Explain the following term/concept:
Bank
Correct the underlined word and rewrite the following sentence:
Accepting deposits is the secondary function of Banks.
