How to handle overdue overdraft debt

What is overdraft?

Overdraft is a form of capital lending by a credit institution. Accordingly, the debit card holder is allowed by the bank to spend more than the available balance in his payment account. This excess amount is called the overdraft limit. The bank will charge interest on the excess amount you have spent.

For example: The bank gives the account holder an overdraft limit of VND 20 million. The actual balance in the account is VND 20 million. That means you are allowed to spend a maximum of VND 40 million. If you spend all VND 25 million, the amount you spend over the limit is VND 5 million. The bank will charge interest on this VND 5 million until you repay the amount.

Overdraft loans mostly meet urgent borrowing needs in a short period of time. However, the interest rates are often high, so people need to consider carefully.

Overdue debt

When a customer is unable to pay the full amount of interest and principal as stipulated in the contract when the payment is due, their debt becomes overdue.

When an overdraft is overdue, the borrower will be subject to penalties, penalty interest and other costs associated with debt management.

If the borrower fails to repay or does not fully repay the overdraft balance exceeding the limit, the bank will terminate the loan and recover the entire overdraft balance early.

For overdraft debt, borrowers who do not pay on time will have their files transferred to a debt collection company, lose their credit score, or be taken to court to resolve debt disputes.

For example, you are given an overdraft limit, specifically the bank allows you to spend 100 million VND more than the actual amount in your account, for a period of one year, but due to late payment of 10 million VND, you are put on the bad debt list group 2.

To get off this list, borrowers must pay all bank debts on time within 3 months.

Within 12 months from the date of group 2 debt, if the borrower pays on time, the bad debt history on CIC will be cleared, then they can borrow capital from banks as before.

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