There are two primary types of overdraft facilities—secured and unsecured. A secured OD is backed by collateral such as fixed deposits, insurance policies, property, or shares, and typically attracts lower interest rates. In contrast, an unsecured OD is based on your income profile, credit score, and banking relationship, and is more common among salaried professionals or businesses with a healthy financial track record.

One of the key advantages of an OD limit is that interest is charged only on the amount utilized, not on the entire sanctioned limit. This makes it an efficient credit tool, particularly for business owners who face periodic cash flow mismatches or for professionals who want to ensure liquidity without liquidating investments. OD tenures are generally renewable annually, with flexible repayment terms, and in most cases, you can prepay or close the facility without heavy penalties.

At FinflickTax, we assist our clients throughout the entire OD application process—from evaluating eligibility and choosing the right type of overdraft, to compiling necessary documentation and liaising with banks for fast approvals. We also advise on how to strategically use OD facilities to maximize tax efficiency, especially when used for business purposes (as interest payments on business overdrafts are often tax-deductible). Whether you’re looking to optimize your working capital, manage seasonal expenditures, or simply stay financially agile, our team ensures you’re equipped with the right tools to succeed.