Personal loans and overdraft are two different types of credit facilities that many financial institutions offer.
You may be aware of the personal loan, but not many know about the personal overdraft loan.
Let’s check out the differences between the personal loan and the personal overdraft loan in this post!
What is the personal overdraft loan?
The personal overdraft loan is an agreement between the borrowers and creditors. In this case, borrowers are allowed to withdraw an amount that is not available in the account. Even if the account balance is zero, then you can withdraw money. But this facility is not available to all – if you have a convincing credit history, then you may avail the same.
What is the difference between the personal overdraft loan and overdraft?
1. Quick availability of funds
If the lender approves this facility, then the account holder can withdraw the funds. Personal loans, on the other hand, are subject to lender’s approval.
2. Application process
The facility of the personal overdraft loan is a one-time process. Once done, then you can use the same as per your wish. For availing the personal loan, you need to apply for it every time.
3. Credit limit
The credit limit of the personal overdraft loan varies from lenders to lenders. Once the credit limit gets fixed, then you may not be able to withdraw a higher amount. On the other hand, the personal loan amount is determined mutually by both parties. You have the flexibility to borrow as per the needs.
4. Interest rate
The rate of interest for the personal overdraft loan is higher than that of personal loans. But in case of personal overdraft loan, the interest rate on personal loan is charged only an amount gets discharged. Nowadays, top lenders also let you withdraw an amount out of the sanctioned amount as per your wish. This way, you can pay only the interest as the EMI and save on the repayments.
The basic differences between the personal overdraft loan and the overdraft facility are now revealed for you to make the right decision.
