Distinguish between the following:
Loan & Overdraft
ANSWER:
Basis of Difference
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Loan
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Overdraft
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Meaning
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In the case of loan, a certain amount is advanced for a specific purpose and a specific period.
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It is a facility given to a current account holder to withdraw amount more than what he/she has in his/her account.
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Eligibility
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Any account holder can get a loan from a bank.
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Only current account holders can enjoy this facility.
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Rate of interest
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Comparatively low interest rate is charged.
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A high interest rate is charged.
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Duration
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It is meant for a long period.
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It is meant for a short period.
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Amount
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The amount given as a loan is high.
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The amount of an overdraft is comparatively smaller.
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Separate account
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Separate account is required.
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Separate account is not required.
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