How to handle overdue overdraft debt

What is an overdraft?

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

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

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

Overdue overdraft debt

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

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 repay in full 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 debt collection companies, lose credit scores 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.

Source