Post Dated Cheques
Updated on October 4, 2023
The use of post-dated cheques is quite common in many types of loans, especially vehicle loans. The meaning of this common term and the related details are mentioned below.
Meaning of post-dated cheques
Post-dated cheques (PDCs) are checks issued by borrowers to lenders with future dates on them. Borrowers provide PDCs to their lenders as a method of loan repayment. These cheques are dated for specific future dates corresponding to the loan’s instalment due dates.
What are the key aspects of post-dated cheques?
Post-dated cheques (PDCs) play a crucial role in loan repayment. Borrowers provide these cheques to lenders when they receive a loan, with each cheque dated for a specific instalment due date as per the loan agreement. Lenders see PDCs as a form of security, ensuring they can access funds on predetermined dates, and reducing the risk of defaults. It’s the borrower’s responsibility to maintain sufficient funds in their account to cover these cheques, as bounced PDCs can lead to penalties and harm their creditworthiness. PDCs typically cover both the principal loan amount and the interest, and lenders present them to the bank for clearance on the respective due dates, considering the instalment paid once cleared.
Benefits of Using Post-Dated Cheques (PDCs) –
PDCs offer several advantages for borrowers. They enable timely repayment, reducing the risk of late fees and defaults, while also providing convenience as borrowers don’t need to manually initiate payments. Moreover, consistent, on-time PDC payments can enhance the borrower’s credit history, demonstrating their creditworthiness to potential future lenders.
