Difference Between Cash Credit and Overdraft: A Complete Guide

When businesses or individuals need short-term financial assistance, they often consider Cash Credit (CC) and Overdraft (OD). Both facilities provide liquidity to meet urgent financial requirements, but they serve different purposes and have distinct features.

At Bravima Solution Pvt Ltd, we help businesses and individuals secure the right financing solutions from leading NBFCs and banks. Understanding the differences between Cash Credit and Overdraft can help borrowers choose the most suitable option for their needs.

What is Cash Credit (CC)?

A Cash Credit is a short-term loan given to businesses to finance working capital needs. It is secured against inventory, receivables, or other assets. Businesses can withdraw funds up to a sanctioned limit and pay interest only on the utilized amount.

Key Features of Cash Credit

Purpose: Used for business working capital needs.
Security: Requires collateral (e.g., inventory, receivables).
Loan Limit: Based on business turnover and financials.
Interest Rate: Usually lower than overdraft rates.
Repayment: Flexible repayment without fixed EMIs.
Usage: Cannot be used for personal expenses.

What is Overdraft (OD)?

An Overdraft is a credit facility linked to a bank account that allows individuals and businesses to withdraw more than the available balance, up to a sanctioned limit. It is granted based on credit history, financial stability, or security pledged.

Key Features of Overdraft –

Purpose: Can be used for both personal and business needs.
Security: Can be secured or unsecured.
Loan Limit: Based on income, credit score, or collateral.
Interest Rate: Higher than cash credit but charged only on the used amount.
Repayment: No fixed repayment schedule, but timely repayment is recommended.
Usage: Can be used for business or personal expenses.

Cash Credit vs. Overdraft: Key Differences

Feature	Cash Credit (CC)	Overdraft (OD)
Purpose	Business working capital	Business or personal expenses
Security	Requires collateral	Can be secured or unsecured
Loan Limit	Based on business turnover	Based on credit score or income
Interest Rate	Lower than overdraft	Higher than cash credit
Repayment	No fixed schedule	Flexible repayment
Availability	For businesses only	Available to individuals & businesses
Usage Restriction	Business expenses only	No restriction (business/personal)

Which One Should You Choose?

Choose Cash Credit (CC) if:
- You run a business and need funds for working capital.
- You can provide collateral (inventory, receivables, etc.).
- You want a lower interest rate compared to OD.
Choose Overdraft (OD) if:
- You need flexibility for personal or business expenses.
- You have a strong credit history and financial stability.
- You don’t have assets to pledge as collateral.

Eligibility Criteria for CC and OD

Criteria	Cash Credit (CC)	Overdraft (OD)
Who Can Apply?	Businesses only	Individuals & Businesses
Collateral Needed?	Yes (inventory, receivables)	Not always required
Minimum Credit Score	700+	700+
Minimum Income	₹10 Lakhs annual turnover	₹30,000 monthly salary

Interest Rates & Charges (2024)

Bank/NBFC	Cash Credit (CC) Rate	Overdraft (OD) Rate	Processing Fee
HDFC Bank	9.50% – 12.00%	10.00% – 14.00%	1% – 2%
ICICI Bank	9.25% – 11.75%	10.50% – 13.50%	1% – 2%
Axis Bank	9.75% – 12.50%	11.00% – 15.00%	1% – 2%
SBI	8.75% – 11.50%	9.50% – 13.00%	1% – 2%
Bajaj Finserv	10.00% – 14.00%	11.00% – 15.50%	1.5% – 2%

Note: Rates are indicative and subject to change based on borrower profile.

How to Apply for Cash Credit or Overdraft?

Check Eligibility: Visit Bravima Solution Pvt Ltd for eligibility criteria.
Choose the Right Loan: Select CC or OD based on your financial needs.
Submit Documents: Provide KYC, income proof, and business documents (if applicable).
Loan Approval: Bank/NBFC evaluates creditworthiness and approves the loan.
Utilize Funds: Withdraw as needed and repay conveniently.

FAQs on Cash Credit & Overdraft

1. Can I use Cash Credit for personal expenses?
No, CC is only for business working capital needs.

2. Is an Overdraft facility better than a Personal Loan?
It depends. Overdraft is more flexible, but personal loans offer structured EMIs.

3. What happens if I don’t repay my Overdraft amount?
Non-repayment can lead to penalties, higher interest, and a lower credit score.

4. Do all banks offer both Cash Credit and Overdraft?
Most banks and NBFCs offer both, but eligibility and terms may vary.

5. How long does it take to get approval for CC or OD?
Approval usually takes 3-7 working days, depending on the lender.

Conclusion

Both Cash Credit (CC) and Overdraft (OD) are useful financial tools, but their usage depends on the borrower’s requirements. If you need funds specifically for business operations, Cash Credit is ideal. If you need flexible funding for personal or business needs, Overdraft is a better option.

At Bravima Solution Pvt Ltd, we connect borrowers with the best NBFCs and banks for Cash Credit and Overdraft facilities at competitive interest rates. Apply today and manage your finances smartly!