This refers to a loan arrangement where a negative balance is held on a current (checking) account.

With prior approval from their bankers, individuals or businesses may withdraw more from their current accounts than has been paid in, up to an agreed level (overdraft facility). This is the most common form of short term loan with interest payable only on the days when the account is negative. It may be secured or unsecured and make be called in by the baker on demand.

Overdraft is a term normally used in financial management.

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