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Understand the difference between Cash Credit and Overdraft

Though most people mistakenly believe that both of these products are identical, they are actually quite distinct. In this blog, we help you understand cash credit and overdraft while also highlighting the key differences between them.

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Understand the difference between Cash Credit and Overdraft

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  1. Understand the difference between Cash Credit and Overdraft

  2. 1. What does cash credit mean? It's short term funding that helps businesses to meet their working capital needs.

  3. Know how cash credit works • Available for a maximum period of 12 months. • You can withdraw funds above the account's available balance. • You need to renew the cash credit account after the term concludes.

  4. Key features of cash credit • Available exclusively for businesses and after putting up collateral. • Pre-specified terms and conditions. • No restrictions on the number of transactions.

  5. What does overdraft facility mean? • You can overdraw from your account up to a certain limit. • Overdraft limit is pre-approved.

  6. Know how overdraft facility works • Overdraft increases your account's outstanding balance. • Partial repayment option is available. • Following your repayment, you can again overdraw from your account.

  7. Key features of overdraft facility • Also available on a joint account. • Fee is applicable on the overdrawn amount.

  8. Key distinctions between cash credit and overdraft • Cash credit is solely offered to enterprises, while overdraft is open to both businesses and individuals. • Cash credit is based on inventory availability, whereas overdraft is based on the lender-borrower relationship. • Cash credit is available at a lower interest rate than overdraft facility.

  9. 1. Similarities between cash credit and overdraft Interest calculation method and repayment pattern are same for both.

  10. Both these funding alternatives have their own merits. Evaluate them thoroughly before making any decision.

  11. Thanks! Would Love to hear from you. Hero Fincorp Limited 09, Basant Lok, Vasant Vihar, New Delhi - 110057 Tel : 18001024145 Email : corporate@herofincorp.com Website : https://www.herofincorp.com/ Know More : Understand the difference between Cash Credit and Overdraft

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