If you are aware of the banking facilities in our country, you must have heard about personal loans and personal overdrafts. Often, people think about them as the same. In reality, this is not the case. There are prominent differences between personal loans and draft facilities. In this blog, we will try to find out some of the key differences among them, along with the basics of each facility.
Those who have doubts can easily consult with DSA partners and have clarity about each of them. Until you gather enough information about these facilities, you can’t decide the best one for yourself.
Basics of an Overdraft Facility
First, we need to know about the overdraft facility. Almost every bank offers this facility to customers with savings or current accounts. In an emergency situation, you can withdraw more cash than your savings in the account. There is an overlimit to it, and you need to qualify for the facility. Here are some of the important aspects that you must know about.
- If you don’t have any money in the account and are looking for an overdraft facility, you won’t get it.
- Having a profound financial background is important for having an overdraft facility.
- Once you get the money, don’t forget to repay it within time. Else, the banking and financial institutions will take action against you.
What is the Right Time to Get an Overdraft?
There is no fixed time for the overdraft situation. In an emergency situation, an overdraft facility can help us pay our bills and get many more benefits as well. Here are a few of them-
- Banks usually offer easy repayment options for overdrafts. You will usually have a month or two to pay your debts, which should be enough for any person to settle pending dues.
- If you repay the bill within the allotted time, according to the law, you will not be charged any extra amount. Isn’t this great?
- Even if you can’t pay your debt amount within time, the payable interest rate is low. Make sure to learn about your particular bank before using the overdraft facility.
Things You Need to Know About Personal Loans
We have discussed personal loans in this blog so far. Without knowing about personal loans, it is not fair to compare them with overdraft facilities. Almost all banks and financial institutions offer personal loans. These are unsecured loans that are easy to get, and there are no limits on where you can use the loan and where not. As the name suggests, you are getting the loan for purely personal reasons.
What Makes Personal Loans So Special?
You may be thinking about the specialties of personal loans. Read the following ones to learn more about these loan options-
- Personal loans are highly customizable. Depending on the need, you can transform your loans.
- After consulting with experts, we have concluded that personal loans are more free-flowing in nature. You can use personal loans to pay your hospital bills or for vacation expenses.
- Unlike other loan options, you don’t need any collateral. That’s why most people prefer to have personal loans.
Talking to a banking official will help you understand that particular bank and the loan options offered by the bank.
Key Differences Between a Personal Loan and A Personal Draft
We are almost done with the setup. It is time to compare personal loans and overdrafts. After knowing all the aspects, it is up to you to choose the best one-
- There are fixed bank charges on personal loans. For overdrafts, most banks don’t charge anything.
- The overdraft facility has a clear limit. Personal loans are variable. Any bank will first check your financial dealings and then decide the amount they are comfortable providing.
- Nowadays, getting personal loans has become much easier. It is almost instant now. In an overdraft situation, you don’t need any approval from the bank, making the process faster.
- You already know about the interest rate on a personal loan. You also need to pay interest rates during an overdraft, but the law is slightly different there. You can consult with a Personal Loan DSA Partner to know more.
As you can see, there is a clear difference between personal loans and overdrafts. Consider all these factors when making the final call.