Image credit hooo-faq.ru

Image credit hooo-faq.ru

ZIMSEC O Level Commerce Notes: Money and Banking: Bank Loans and Overdrafts

LoanBank Overdraft
Is a formal way of borrowingIs an informal way of borrowing
Is available to anyone who meet the requirementsIs available to current account holders only
Collateral security is neededCollateral security is not needed.
A loan account is openedNo loan account is opened.
Interest is charged on the whole loan amountInterest is charged on the oustanding amount on a daily basis
The rate of interest is fixedThe rate of interest is variable
Regular payments via instalmentsRepayments are irregular
The interest rate is usually lowThe interest rate is usually high
Most suitable for long term projectsMost suitable for short term working capital
The repayment period is fixedThe repayment period is not fixed

To learn more about Bank Overdrafts and Bank loans go to this page.

To access more topics go to the Commerce Notes page

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