Running Finance is another type of loan product offered by Banks. This can be used as an alternative to a Term Loan. Running Finance Facility is a more flexible and cost effective product, where you do not need to commit to a long tenured loan or monthly payments.
With Running Finance Facility the bank approves a specific cash limit for you to utilize. This limit can be up to 2 million rupees, without any security or collateral. Running Finance Facility is based on “Pay as you Utilize” principal. When you use any amount from your Running Finance Facility you will be required to pay back the amount utilized plus mark-up / interest. You can utilize your Running Finance Facility through a check book or debit card issued by the bank.
Banks typically charge an annual fee on Running Finance Facility, however policies on how this can be waived varies from bank to bank.
For instance you received a running finance of Rs. 500,000, and you took out only Rs. 150,000 for a period of 15 days. You will be charged interest on the Rs. 150,000 for 15 days only. At the end of the month your bank will send you a statement informing you of the mark-up / interest you are required to pay.
As illustrated above you should use Running Finance Facility for your immediate short term cash needs. You can use Running Finance Facility to pay your Credit Card bills, utility bills, unforeseen expenses such as car repairs, emergency medical treatments etc.
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