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An Overdraft (OD) Limit Loan is a type of loan provided by banks and financial institutions that allows account holders to withdraw more money from their account than what they have in it. The OD limit is pre-approved by the bank and allows customers to withdraw money up to a certain limit, which is generally based on their creditworthiness and financial standing.

OD limit loans are commonly used by businesses to meet their short-term financing requirements, such as managing cash flow gaps or meeting unexpected expenses. The interest on the amount withdrawn is charged only on the amount used and for the period it is used.

The OD limit is reviewed periodically by the bank based on the borrower’s financial performance and repayment history. If the borrower maintains a good credit record, the bank may consider increasing the limit in the future.

Financial professionals, such as Chartered Accountants and business consultants, can assist borrowers in preparing the loan application, evaluating the collateral, and negotiating with banks or financial institutions to secure favorable terms and interest rates.

By availing OD limit loan services, borrowers can manage their short-term financing requirements and ensure that they have access to funds when required. However, borrowers must exercise caution while availing OD limit loans as any default in repayment can lead to legal action by the lender.

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