Basis | Loan | Cash Credit | Overdraft |
1. Mode | A loan may be given in cash or by credit to the account of the borrower. | Cash credit is always given through the current account. | Overdraft is granted to the current account holders. |
2. Borrower | The borrower of the loan may be a customer of the bank or otherwise. | The borrower of cash credit becomes a customer of the bank when he opens the current account. | An existing customer having a current account is granted overdraft facility by the bank. |
3. Security | A loan may be granted against tangible securities or personal guarantee of the borrower. | Cash credit is always given against some tangible securities. | Overdraft may be clean, partly secured or fully secured. |
4. Interest | Interest is charged on the entire amount of the loan. | Interest is payable only on the amount actually utilised by the borrower. | Interest is payable on the amount overdrawn from the current account. |
5. Rate of interest | The rate of interest charged by the bank in case of loan is lower than that of the cash credit and overdraft. | The interest rate in case of cash credit is higher than that of the loan and overdraft. | The rate of interest in case of overdraft is higher as compared to loans but lower than cash credit. |
6. Maturity | A loan has a specific maturity date and is repayable after a fixed period of time. | Cash credit does not have a fixed maturity date and it is technically repayable on demand. | Overdraft is repayable on demand and does not have any maturity date. |
7. Period of advance | A loan may be taken by the borrower for a short, or medium or long period of time. | Cash credit may be obtained by the borrower for a short, medium or long period of time. | Overdraft is a short term temporary arrangement. |
8. Number of withdrawals | In case of loan, funds are withdrawn once by the borrower. | In case of cash credit funds are withdrawn a number of times by the borrower. | In case of overdraft, funds are withdrawn a number of times. |
