BANKING AFFAIRS

Detailed explanation-1: -Overdraft taken against a bank account without submitting any security is considered an unsecured overdraft, while the overdraft where the collateral is pledged is considered a secured overdraft.

Detailed explanation-2: -An unsecured overdraft means that you do not need to pledge any assets to your financial provider in order to access the facility. Meanwhile, secured overdrafts require you to commit a range of assets, such as residential, commercial and industrial property, to give you a line of credit.

Detailed explanation-3: -An overdraft is a loan provided by a bank that allows a customer to pay for bills and other expenses when the account reaches zero. For a fee, the bank provides a loan to the client in the event of an unexpected charge or insufficient account balance.

Detailed explanation-4: -There are two basic types of overdrafts – secured and unsecured. While the former requires assurance in the form of collateral, the latter only needs the borrower to hold an account with the lending bank. The banks charge a processing fee initially and then impose interest on the sum overdrawn or the borrowed amount.