Secured overdraft

    An overdraft is kind of a loan that you take from a financial institution. Banks may allow you, as an account holder to withdraw more money or write cheques for amounts more than the available balance. This could be useful when you need extra cash to get things done.

    Types of overdraft

    The two types of overdrafts are called the secured overdraft and the unsecured overdraft. Secured overdraft means pledging your financial asset to borrow money from the bank. Unsecured overdraft is when you have not pledged any financial asset to borrow an amount.

    Features of secured overdraft

    • There is no annual income eligibility as you are pledging your financial asset to gain the amount.
    • The amount you could borrow, that is, the overdraft limit is set by the bank depending on the type and the market value of the asset pledged.
    • Whatever amount you withdraw, you have to pay interest only for that amount. Interest is calculated on a daily basis and you can keep borrowing the amount you pay back up to the overdraft limit because this is a revolving credit facility. In other words, you can borrow more money after repaying a part of the amount back.
    • Also, there is no minimum amount set for withdrawal. You can withdraw any amount as long as it is within your overdraft limit.
    • The interest rates are generally calculated based on the Prime Lending Rates in Singapore.
    • You may have access to the amount through ATM cards, cheques and online banking.
    • There could be other charges on this type of loan apart from the interest rates. You may have to pay for the cheques issued in your name.
    • The overdraft facility differs from a regular loan in the sense that you can repay whenever you want. There is no fixed monthly payment involved. The flip side, however, is that the bank can ask you to repay the entire amount anytime it wants.
    • If your bank account is jointly held with another person, you both can access the overdraft facility. Therefore, you both will equally responsible to the bank for repayment.

    Banks offering Secured Overdraft

    • HSBC Secured Overdraft: HSBC accepts term deposit accounts, structured notes, unit trusts, bonds and shares (index stocks traded on the Singapore Exchange mainboard) as assets for securing an overdraft. You need to contact either your relationship manager at HSBC or call on the HSBC hotline for application enquiries.
    • Citibank Secured Overdraft: Citi Singapore allows you to get funds against your pledged assets in Singapore dollar as well as US dollar. You should have a US dollar or Singapore dollar checking account to use this facility. Citi accepts term deposits, certain investment funds and house in Singapore as collaterals.
    • Maybank Secured Overdraft: Maybank also allows you to pledge time deposits (both Singapore dollar and foreign currency deposits), structured deposits, and unit trusts to get the overdraft. You also need to have a current account with the bank to enjoy this facility. The interest rate is pegged to Maybank’s Prime Lending Rate.
    • Bank of China Secured Overdraft: Both individuals and companies can seek overdraft from Bank of China by pledging their collaterals such as fixed deposits, structured deposits and unit trusts.
    • OCBC Secured Overdraft: OCBC’s interest rates for its secured overdraft facility depends on the type and value of the collateral you use to secure the extra cash. You need to contact the bank’s hotline number for further details.
    • UOB Secured Overdraft: The interest rate on this facility is linked to UOB’s prime lending rate. You don't have to pay any minimum amount every month. You can manage your account using the phone banking or internet banking services of UOB.
    • Standard Chartered Secured Overdraft: SC allows you to borrow money against assets such as fixed deposits, structured deposits, ETFs, equities, mutual funds/unit trusts, hedge funds, bonds, premium currency investments and single-premium life insurance policies. You can also borrow in multiple currencies – Singapore dollar, US dollar, Hong Kong dollar, Australian dollar, New Zealand dollar, Japanese Yen, Euro and Great British Pound.
    • RHB Secured Overdraft: You can pledge your time deposits, insurance policies and shares. The interest rates for RHB’s secured overdraft facility starts from 4.25% p.a. The rate of interest for the money borrowed against insurance policies are higher than for the other means.

    The secured overdraft facility is useful to fulfil your short-term financial needs. However, as with any loan, you need to use it wisely so that you don’t fall into greater debt.

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