Cash Credit vs. Overdraft: Know the Difference

Cash credit and overdraft are two credit facilities that offer assistance during a fiscal crisis. On the surface, cash credit and overdraft may appear the same, but they vary in features as well as the purpose they serve. 

Continue reading to find out the difference between cash credit and overdraft.

Cash Credit vs. Overdraft - At a Glance

The differences between CC and OD extend beyond their purpose. The table below lists some of their major differences. 


Cash Credit 



Offered to companies to help them maintain their working capital

Generally used for short term obligations and can be availed by both individuals and businesses

Interest Rate

  • Interest rate is relatively lower than overdraft and calculated on a monthly basis

  • Interest is calculated on the entire amount withdrawn

  • Interest rate can be higher and is calculated on a daily basis

  • Interest is calculated only on the amount availed

Interest calculation

Interest is calculated on the entire amount withdrawn

Interest is calculated only on the amount availed


The duration varies based on the lender but can be a year

The duration can range from weeks to months based on the lender


A new account will have to be created

Existing account can be used


Security in the form of stocks or property or inventory is pledged

Extended to the borrower based on their financials, fixed assets, investments, etc


The credit limit depends on business performance 

Assets of the borrower influence the overdraft amount

CashCredit Vs OverDraft

What is Overdraft?

An overdraft is a credit facility offered by lenders such as private and public sector banks that allows you to withdraw an amount that is greater than your existing account balance up to a certain limit. 

This is a great option for short term requirements especially business expenditure such as those needed for new machinery or equipment. Ideally this amount should be used for expenses that can be repaid soon.

Salient Features of an Overdraft

Types of Overdraft Facilities

There are two types of overdraft facilities - secured and unsecured. 

To get a secured one, you have to pledge an asset as security to the bank such as property, deposits, or shares. If you fail to repay your debt, the bank will have the power to take over the pledged asset and sell it. If the amount after selling your asset is less than the amount you withdrew, you will have to pay the difference.

An unsecured one does not require any collateral but the amount offered will depend on your income.

What is Cash Credit?

A cash credit on the other hand is a facility that is designed keeping in mind the needs of small and medium business owners. 

It is a short-term loan that can help business owners in meeting the working capital needs of their business. Generally, cash credit is a facility that is offered to business owners and not to individuals. 

Salient Features of Cash Credit

In addition to knowing the difference between cash credit and overdraft, you should also keep the following points in mind.

For example, processing fees can vary considerably from bank to bank, so be sure to check what you will be paying before signing up for a loan. Similarly, interest rates and limits placed on loan amount utilization may vary from bank to bank as well. Some banks do charge extra on the unutilized loan amount after a specific period.

Finally, if you would like to close out an account in the future and receive a refund of any unused funds remaining in your account, you may have to pay a foreclosure fee as well.

Does moneyview offer Cash Credit or Overdraft?

moneyview does not offer overdraft or cash credit facility. However, we do offer an alternate financing option which is a personal loan.

Our personal loans come with an easy application process, minimal documentation, and flexible repayment terms. You can avail a loan ranging from Rs. 5,000 to Rs. 10 lakhs within 24 hours of application approval. 

All you need to do is visit our website or download the app and apply today.


In India, short-term financing is offered by financial institutions in the form of cash credit and overdrafts. Cash credit and overdrafts are popular forms of borrowing among Indian entrepreneurs. Both types of borrowing are secured by collateral, however, overdrafts are much more expensive than cash credits.

Cash Credit vs Overdraft - Related FAQs

A bank overdraft is a credit facility extended to borrowers by their respective banks when their balance reaches zero. The interest is applied to the amount utilized and not the whole amount. 

The purpose of cash credit loans is to help small businesses raise working capital. They are short-term loans provided by banks and other financial institutions. This funding option does not require companies to have a credit balance or an account with the lender.

Cash Credit is offered to businesses for working capital requirements and comes with a lower interest rate. The borrower doesn't have to hold an account with the lender prior to availing cash credit.

An overdraft facility is extended by the banks to individuals as well as companies based on their assets, creditworthiness, financials, and more. The borrower must have an account in the bank and the overdraft limit depends on the financials of the borrower.

Yes. If you do not repay the overdraft amount within a specified time, your credit score will decrease.

To determine the amount of cash credit that a company is eligible to receive, several factors are taken into consideration, including the applicant's profile, the bank's relationship with the company, and the financial stability of the company, etc


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