Credit practice is as old as humanity itself. Though they seem to evolve as time goes by, they still fulfill the same purpose of alleviating financial emergencies. An Overdraft is just another interesting form of credit. When you need some emergency cash, an Absa Overdraft could be the answer for you.
Through this article, we will take a deep dive into all there is to know about.
What is an Overdraft?
An overdraft is essentially a short-term credit solution that lets you continue withdrawing money from your bank account even when your balance is zero or below. Unlike loans, where you borrow a fixed amount, an overdraft gives you access to funds as needed, up to a pre-set limit.
Think of it as a financial safety net. If you’re facing an urgent need for cash but don’t have enough in your account, the overdraft covers the expense. You only pay interest on what you’ve used, and it automatically repays once funds enter your account. It’s that simple!
Absa Overdraft: Personal Use vs. Business Use
Absa offers overdraft facilities tailored not only for personal use but also for businesses. Both options provide flexibility and financial support, but they serve different purposes and come with distinct features.
Personal Overdraft
- Designed for individuals who need quick access to additional funds for personal expenses, whether it’s for handling an emergency, paying bills, or covering short-term cash flow gaps.
- Flexible limits based on your income and credit profile, making it accessible for a wide range of customers.
- Linked to your personal transactional account, so you can access funds easily and only pay interest on what you use.
Business Overdraft
- Specifically designed for businesses of all sizes, from SMEs to larger corporations, to manage cash flow fluctuations, handle operational expenses, or seize growth opportunities.
- Larger credit limits are available compared to personal overdrafts, reflecting the financial needs of businesses.
- Repayment flexibility allows businesses to cover expenses without the need to take out long-term loans. Like the personal overdraft, interest is only charged on the amount used.
- Customizable limits and terms, meaning businesses can adjust their overdraft facilities to match their operational needs.
How Does Absa Overdraft Work?
Absa’s overdraft is a flexible facility linked to your transactional account, giving you immediate access to funds when your balance falls short. Here’s how it works:
- Instant Access: Once approved, the overdraft becomes part of your account, and you can use it as needed.
- Pre-Approved Limits: Based on your financial profile, Absa will set an overdraft limit you can draw from. The amount depends on your creditworthiness and income level.
- Flexible Repayment: No fixed repayments! You repay your overdraft whenever money enters your account, reducing the balance automatically.
To apply for an Absa overdraft, you’ll need to meet certain requirements, including being over 18 years old, having a steady income, and passing a credit check.
Qualification requirements for an Absa Overdraft.
The following requirements are necessary to qualify you for an Absa Overdraft;
| Personal Overdraft | Business Overdraft |
| Have a regular monthly income of at least R2 000 per month | Hold an active business current account with us |
| have a cheque account into which your monthly income is paid | Individual guarantee of the principal. |
| Be 18 years or older | – |
How to apply for Absa Overdraft?
Applying for an Absa overdraft is straightforward and can be done through various methods depending on your customer status and the mode of access.
If You’re an Absa Customer:
- Absa Online: Log in to yo4ur online banking account, navigate to the “Offers” section, and select the overdraft option under “Transactional Solutions.”
- Absa Banking App: Log in, tap on “Offers,” and choose the overdraft facility. Follow the prompts to complete your application.
If You’re Not an Absa Customer:
You can apply by opening a cheque account, such as the Gold Value Bundle or Premium Banking Account, which includes an overdraft option. Alternatively, you can visit any Absa branch or contact their customer service on 0860 100 372 for assistance.
Key points to note before applying for an Absa overdraft
Before applying for an overdraft or any financial product at all, it is important to know the facts about that product. Some key points to note about Absa overdraft includes;
Repayment term
Absa overdrafts come with a flexible repayment plan. You only get to pay a once off initiation fee of up to R1 207.50 on a new facility. A monthly service fee of R69.00 and monthly interest on the portion of the overdraft limit that you used.
Interest rate
Absa bank uses the Personalised Annual Percentage Interest Rate (APR), up to the maximum of Prime +10,5%.
Estimated interest repayment:
The estimated monthly interest repayment for an overdraft limit of R15 000 at an interest rate of 15% per month where R8 000 of the overdraft limit has been used is R100.
Benefits of an Absa Overdraft?
Some notable benefits of obtaining an overdraft includes;
- An overdraft is linked to your cheque account, making it easy to track and manage transactions.
- Helps to maintain an excellent credit history by avoiding debit reversals due to insufficient funds.
- Convenience, because your overdraft facility is granted for an agreed time period
- Peace of mind, knowing that you can cover any shortfalls in your account or monthly cash flow, up to an agreed limit
- You only pay interest for what you use.
- Get an optional credit protection plan to settle the outstanding balance in case of death, disability, dread diseases or retrenchment.
Conclusion
Getting an overdraft can go a long way in mitigating personal financial emergencies. Be it for health, home or maintenance, technology has eased literally every process for our convenience. The only distinction between an overdraft and personal loan is the fact that an overdraft drawer has to own an account with the financial institution to qualify.