Personal Loan Vs Overdraft: Which One to Pick?
Rita Sanghvi
The COVID pandemic made us realise that emergencies can occur at any time. For example, costly medical bills or hospital admission fees. Other urgencies include a business crisis, home repair or sudden travel. This is when you might require quick funds at your disposal without impairing your existing financial goals. At this point, you have two options: a personal loan or an overdraft facility.
A personal loan is when you borrow an amount with your choice of tenure. An overdraft is when the bank lets you withdraw cash that is more than the current balance. Knowing the differences will help you pick the right product for yourself.
The Upper Limit
An overdraft limit is usually secured against financial assets like a FD. This means you can get only a certain percentage of your fixed deposit. It is also usually given against a salary account or term deposit. But a personal loan is unsecured. You do not need security or collateral. Apply for up to as high as ₹4,00,000 for a tenure of 540 days. After that, you can pay back via affordable EMIs.
Loan App
The top FinTech company offers loan apps for ease of application. You can simply download from Google Play or App Store and get started. Moreover, the whole process is 100% online, which cuts the need for physical paperwork and human interaction.
Overdraft accounts can also be opened via internet banking. But you might have to visit the bank for document verification and other formalities. This can be hectic, especially for young adults who are not well-adept with bank procedures.
Quick Loan Release
A personal loan offers fast disbursal within a few minutes. This makes it ideal for immediate payments like rent deposits or credit card bill payments to avoid delay. The amount is sent directly to your bank account to be used right away. However, an overdraft can take hours up to an entire business day. So it is not a feasible option to cater to urgent needs.
Interest Rate
A personal loan offers lower interest rates as compared to that of an overdraft facility. This makes the product affordable for all. It ensures better savings in the long run. You can pay the EMIs comfortably without running into debt. Further, it helps you take out more than one personal loan at a time since you have better repayment capability.
Conclusion
Personal loan is quite a viable option. Cost-friendly EMIs can be paid easily, which boosts your credit score. The eligibility and documentation are simple as well. You have to ensure a good payment history, updated KYC details, a salary of ₹15,000 and above, a steady career experience and a positive social media footprint. Get in touch with a digital lender to start your borrowing journey today.