| Meaning | Overdraft is an arrangement under which the customer is allowed to withdraw in excess of the balance standing as credit in the current account, but only up to a certain limit. | Loan refers to the fixed sum of money borrowed for a definite period, against collateral, which is expected to be repaid with interest. |
| What is it? | Credit facility | Borrowed capital |
| Source of | Short-term funds | Long-term funds |
| Interest | Charged on amount overdrawn. | Charged on loan sanctioned. |
| Calculation of interest | Daily basis | Monthly basis |
| Repayment | Through deposits in the bank account. | Either on demand or on fixed monthly installments. |
| Is it necessary for a person to be the bank account holder to avail this service? | Yes, he/she should have a current account in the respective bank. | No, it is not compulsory. |
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