Financial companies and banks are featuring new plans to help their customers manage their expenses like a charm.
Personal overdraft and personal loans are the two commonly utilized terms in the professional industry and have got a lot in common but to make choices we have to research a lot; starting with the basics:
What is Personal Overdraft?
In banking terms, an overdraft loan is when money is withdrawn from a bank account and the available balance goes below zero. In this condition, the account is said to be “overdrawn”.
About personal overdraft (or overdraft for salaried), it is a financial plan offered by banks that let customers withdraw more money than their balance. The limit is set by the bank or the lender as an account is created. The overdraft loan is also referred to as Flexi personal loan.
What is Personal Loan?
About personal loan, it is just another type of loan granted for family, personal, or expense purposes. It is different from business loans as it’s consumption is for household or domestic purposes.
A personal loan can be repaid right from your bank account on installments and the tenure is fixed. It is also referred to as ‘consumer loan’.
Personal Overdraft
vs Personal Loan - Which one should you opt-for?
After discussing basics, its time to go for a comparison;
Personal overdraft (Flexi personal loan) has flexible payment options while personal loan has a dead time frame to follow. On the contrary, personal loans are the cost of a fixed EMI for the duration of loan tenure and often lack any flexibility in repayment.
A personal loan is only a fine option if you have planned your expenditure and fixed tenures. Other than that, overdraft for salaried is a recommended strategy to manage your finances.
About the process to get cash in hands, personal overdraft wins every time. A personal overdraft can be taken anytime while personal loan requires documentation and complex patterns to approve funds. Usually, it takes a week or more to get a personal loan while an overdraft can be withdrawn anytime with no limits.
Concluding all this, a personal overdraft is a great idea when you overshoot your monthly expenses and you’re financially capable to repay the withdrawn amount with your next paycheck. While a personal loan seems a fine choice only if you have a long financial plan; how about getting a six-figure amount to meet your urgent medical expenses and then returning them after a year or so?
If it seems like you can repay the loan with a nominal percentage of interest, a personal loan is the way to go.
Overall, an overdraft facility (Flexi personal loan) seems to have reasonable percentages when it comes to repayment and you can take more time to proceed (flexibility is there). A personal loan has no flexibility in payment and you will have to pay a higher interest rate if you delay the payment.
To make a choice out of these two; watch out your expenses, if your income is above your average expenses, you can go for a personal loan as you can save and repay on time. On the contrary, if you’re able to meet your expenses only, go for overdraft as it is flexible and you will have no hassle in repaying later!
Expertise in credit products