Whenever one needs finance, they look for numerous alternatives available. Similarly, two commonly used financing services are personal loans and overdraft facility. Both the services have their own unique features, which make them stand out from others.
However, one thing which people don’t know about is the difference between a personal loan and an overdraft facility. This usually happens when an applicant is borrowing a loan for the first time. By reading this article, you will be able to understand why a personal loan is not like an overdraft service.
Apart from increasing your knowledge, our write-up will even allow you to make a sound decision. It is especially when it comes to overdraft and personal loan eligibility. Also, you will be able to choose a service that best suits your needs and requirements.
What is a Personal Loan?
A personal loan is a short-term financing service, which does not have a significant funding limit. The reason why borrowers prefer generating finance with the help of this service is due to the low-interest rates on personal loan. However, one might have to spend time searching for the best interest rate personal loans, if they do not have a good credit history.
On the other hand, in case of a personal loan, the borrower needs to start paying interest as soon as it is deposited in their account. This means whether you use the money or not, you will be charged interest from the initial phase itself. It can prove to be negative for some borrowers, especially if they require finance more often.
Although, the loan acquiring process in case of personal loans is not very elaborate. Most financing agencies provide personal loan online application. It can be used by borrowers easily these days. This allows them to apply for a loan using the digital platform. They can even compare personal loan rates online as well.
What is an Overdraft Facility?
Since, now you know what a personal loan is, let us talk about how it is different from an overdraft facility. Borrowers who have a bank account can utilize an overdraft facility. In other words, the service is extended by banks where you have a savings account already active.
The service allows you to withdraw additional funds from the same account, where you have been depositing money. For example, if your overdraft limit is set at Rs.1 lakh, and you have Rs. 2 lakh in your account, then you can withdraw up to Rs.3 lakh.
However, the main difference between a personal loan and an overdraft facility is the interest rate factor. In the case of an overdraft, you do not have to pay interest till the time you actually withdraw the additional amount from your bank account. But with personal loans, you will have to pay interest ever since the amount is deposited in your account.
NBFCs allows you to get financing services like personal loans, home loans, business loans, and more. They even have specific pre-approved offers on them, which can make the loan processing hassle-free and fast.
To borrow quick finance, you can unlock your customized pre-approved loan offers. All you would need to do is submit necessary personal information like contact number and name.