Salary account overdraft
A limit offered on the account where your salary is credited, based on your salary and profile.
Salary overdraft guide
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Salary Overdraft for salaried professionals with short-term cash needs
Understand how a salary-linked overdraft works, how it differs from a personal loan, and submit an enquiry to discuss your requirement.
- A revolving credit line linked to your salary account.
- Interest is generally charged on the amount you actually use.
- Repay and reuse within the approved limit, as per lender terms.
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Salary overdraft basics
What is a salary overdraft?
A salary overdraft is a revolving credit limit for salaried people, usually linked to the bank account where your salary is credited. You can withdraw more than your balance, up to the approved limit, and your salary credit and other deposits reduce what you owe.
Unlike a personal loan, there is no lump sum and no fixed EMI schedule. Interest is generally charged only on the amount you use, for the days you use it. The limit, rate, charges and how you must repay are set by the lender, so read the terms before you start using it.
Salary overdraft at a glance
Facility type
Revolving credit limit
Linked to
Usually your salary account, as per lender policy
Interest
Generally on the amount used, for the days it is used
Best for
Short-term or recurring cash gaps between salaries
Limit & charges
Decided by the lender based on your salary and profile
Eligibility
Salary overdraft eligibility
Lenders base the limit mainly on your salary and repayment record. Criteria differ by lender; commonly reviewed factors are:
- Regular salary credits, often into an account with the same lender.
- Stable employment, and the employer's profile as assessed by the lender.
- A healthy credit score and on-time repayment history.
- Existing EMIs and card dues that leave room for the facility.
- Age and residence within the lender's accepted range.
Documents required for a salary overdraft
If you already have a salary account with the lender, it may need very little from you. Otherwise, the usual list is below; lenders may ask for more.
For salaried applicants
- KYC: PAN card, Aadhaar or other identity and address proof, and photographs.
- Recent salary slips.
- Bank statements showing salary credits.
- Form 16 or income tax returns, if the lender asks.
- Employee ID or other proof of employment, where required.
How it works
Salary overdraft process: step by step
A salary overdraft is set up as a limit on your account rather than paid out as a loan. The usual sequence is:
-
Application
You apply with your bank or lender, often through its app or branch, with basic personal, employment and salary details.
-
Documents and KYC
The lender verifies your identity and income. Existing salary-account customers may need fewer documents.
-
Credit check
The lender checks your credit report and existing EMIs to decide whether to offer a limit, and how much.
-
Sanction and terms
If approved, you receive the limit, interest rate, validity, renewal terms and charges in writing. Check how interest is calculated and how you must repay.
-
Limit activated
After you accept the terms, the limit is set up on your account and you can draw from it when needed.
-
Use, repay and renew
Your salary and other deposits reduce the balance. The lender reviews the facility periodically and may renew, change or close it as per the agreement.
Estimate interest
Estimate overdraft interest before you draw
Enter the amount you expect to use, the interest rate from your offer and how many days it will stay unpaid to see the interest for that period.
- Interest is generally charged only on the amount used, for the days it stays unpaid.
- Your next salary credit usually brings the balance down, which reduces the interest.
- If you will need the money for many months, compare the cost with a personal loan.
Example only, not an offer
Estimated interest for this period
- Interest per day
- Amount to repay
Simple daily interest on the amount used. It excludes fees, renewal charges and taxes. Open the full EMI calculator
Overdraft or loan
Salary overdraft vs personal loan
A personal loan gives you the full amount at once, and you repay it in fixed EMIs over an agreed tenure, with interest on the outstanding loan balance. A salary overdraft gives you a limit, and you pay interest only on what you draw, for as long as it stays unpaid.
That makes an overdraft useful for short gaps that your next salary will cover, such as a medical bill or an urgent payment near the end of the month. For a one-time expense you will repay over many months, a personal loan's fixed EMIs are often easier to plan.
Under RBI directions, for facilities sanctioned or renewed on or after 1 January 2026, regulated lenders cannot levy prepayment charges on an overdraft if you tell them, within the period stated in your agreement, that you do not want it renewed, and it is closed on the due date.
Salary overdraft vs personal loan
Salary overdraftPersonal loan
How funds are given
Salary overdraftA limit you draw from when needed
Personal loanA one-time lump sum
Interest
Salary overdraftGenerally on the amount used, for the days it is used
Personal loanOn the outstanding loan balance, built into EMIs
Repayment
Salary overdraftFlexible; deposits reduce the balance
Personal loanFixed EMIs over an agreed tenure
Best for
Salary overdraftShort or recurring gaps between salaries
Personal loanA one-time expense repaid over months
Source: RBI (Pre-payment Charges on Loans) Directions, 2 July 2025.
Options
Types of overdraft for salaried people
Salaried people can get an overdraft in a few different ways. What is available, and on what terms, depends on the lender.
Personal credit line
A limit from a bank or NBFC, often through an app, which you draw into your bank account as needed and repay with interest on the amount used.
Overdraft against fixed deposit
A limit secured by your fixed deposit with the lender. Your deposit stays invested while you use the limit.
Overdraft against securities
A limit secured by shares, mutual funds, insurance policies or other securities the lender accepts.
Know the full cost
How to compare salary overdraft offers
Overdraft offers differ in more than the rate. When you compare:
- Check how interest is calculated and how often it is debited.
- Add up the processing, renewal and other fees over a year.
- Check how you must repay: whether a minimum amount is due each month, or the balance must be cleared by a date.
- Check the validity of the limit and the renewal terms.
- Estimate how long you will actually use the money. For many months, compare with a personal loan.
Charges to check before you accept
An overdraft can carry fees even when you draw little. Charges differ by lender, so check each of these in writing:
Processing fee
Charged when the limit is set up.
Renewal fee
Charged when the facility is reviewed and renewed.
Interest on the amount used
How it is calculated, and how often it is debited.
Penal charges
If you exceed the limit or miss a required payment.
GST on fees
Tax added to the processing fee and other charges.
Any annual or maintenance fee. Ask the lender to explain anything you do not understand.
What affects your overdraft limit?
- Your salary and how regularly it is credited.
- Your credit score and repayment history.
- Existing EMIs and card dues.
- The lender's own policy for your employer and profile.
Compare
Salary overdraft vs personal loan vs credit card
| Salary overdraft | Personal loan | Credit card | |
|---|---|---|---|
| How funds are given | A limit you draw into your account when needed | A one-time lump sum | A revolving limit for purchases and payments |
| How interest is charged | Generally only on the amount used, for the days it is used | On the outstanding loan balance, built into fixed EMIs | Usually none on purchases if the full bill is paid by the due date; charged on unpaid balances, per card terms |
| Cash access | Withdraw or transfer from the account | Paid into your bank account | Cash withdrawals usually carry fees and interest from the day of withdrawal |
| Repayment | Flexible; deposits reduce the balance, per lender terms | Fixed EMIs over an agreed tenure | Monthly bill; paying only the minimum due leaves interest on the rest |
| Best for | Short gaps covered by your next salary | A one-time expense repaid over months | Everyday spending repaid within the billing cycle |
Swipe the table sideways to see all three options.
Rates, limits and charges differ by lender and by your profile, so compare actual offers rather than product types alone.
If you were declined
Why salary overdraft applications are declined
Lenders do not always share the exact reason. Common ones include:
- A low credit score, or missed payments or defaults in your credit history.
- Irregular salary credits, or salary credited to a different bank.
- A high existing EMI burden compared with your salary.
- Recent change of job, or an employer the lender does not cover.
- Several loan or card applications in a short period.
Before you reapply, check your credit report and correct any errors, pay down existing dues, and ask your salary-account bank, which already sees your salary credits, about the options it offers.
Use an overdraft safely
An overdraft is easy to dip into, which also makes it easy to overuse. Protect yourself:
Borrow only from RBI-regulated banks and NBFCs. If you are unsure about a lender, check that it is a bank or an NBFC registered with the RBI.
Check that the lender's name on the sanction letter and agreement matches the lender you applied to, including when you apply through an app or an agent.
Never pay an upfront fee to "get a loan approved". Genuine fees are disclosed in writing by the lender.
Do not share OTPs, PINs, passwords or card details with anyone who calls or messages you about a loan.
Read the loan agreement fully before you sign, and keep a copy of every document you sign.
Use the overdraft for short gaps and bring it back down with your salary. A balance that never falls costs more than a personal loan.
FAQs
Salary Overdraft – frequently asked questions
How is a salary overdraft different from a personal loan?
A personal loan is paid out once and repaid in fixed EMIs. A salary overdraft is a limit on your account that you can draw from when needed, with interest generally charged only on the amount used, for the days it stays unpaid.
Do I pay interest on the full overdraft limit?
Generally no. Interest is usually charged only on the amount you use, for the days it stays unpaid, though some lenders charge processing or renewal fees on the limit. Check the terms before you accept.
How much overdraft limit can I get on my salary?
The limit depends on your salary, credit history, existing EMIs and the lender's policy. The lender confirms the limit when it approves the facility.
Do I need a salary account with the same bank?
Many salary overdrafts are offered on the account where your salary is credited. Some banks and NBFCs offer personal credit lines without a salary account with them. It depends on the lender.
How do I repay a salary overdraft?
Deposits into the account, including your salary, reduce the balance. Some lenders also require interest or a minimum amount each month, or the balance to be cleared by a set date. Check the repayment terms in your agreement.
Can I use a salary overdraft more than once?
Yes. Once you repay what you drew, that amount is usually available again within the approved limit, as long as the facility is valid and in good standing.
Is a salary overdraft better than a credit card for emergencies?
It depends on how you need the money and how quickly you can repay. Cash withdrawals on a credit card usually carry fees and interest from the day of withdrawal, while an overdraft charges interest on the amount used. Compare the actual charges on both.
Does a salary overdraft affect my credit score?
Yes. An overdraft is a credit facility, so lenders report it to credit bureaus. Staying within the limit and meeting repayment terms helps; going over the limit or missing payments can lower your score.
Can I close my salary overdraft?
Yes, after clearing the balance. For facilities sanctioned or renewed on or after 1 January 2026, regulated lenders cannot levy prepayment charges if you inform them within the period stated in your agreement that you do not want the facility renewed, and it is closed on the due date.
Why was my salary overdraft application rejected?
Common reasons include a low credit score, irregular salary credits, a high existing EMI burden, a recent job change, or several recent credit applications.
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