Perhaps you have heard the terms personal loan or personal overdraft used for short-term financing. While both terms can be used to finance your needs, there is no commonality between them. They are just as different as chalk and cheese. Let’s examine the similarities and differences.
What’s a personal loan?
Lenders offer personal loans to borrowers with minimum credit requirements and good credit ratings. This loan can be used for any legal purpose, provided the EMIs are fixed, and the tenure is agreed upon.
What’s a personal overdraft?
A personal credit overdraft allows you to borrow a predetermined amount and can be withdrawn as often or in whole. You can use the amount you need and pay back with interest for the entire period.
What are personal loans and overdrafts like?
Personal loans and personal overdrafts can be used for short-term financing. In both cases, you get a predetermined amount determined by your financial situation. Both must be repaid-with interest. LoanTap provides personal loans as well as personal overdrafts without collateral.
Hence, why not use the terms interchangeably? Let’s see.
Repayment in EMI
Personal loans can be repaid in equal monthly payments over the loan term. However, personal overdrafts do not have EMIs. Personal overdrafts must be repaid together with interest earned during the period.
No Fixed Repayment Tenure
Personal loans have a fixed term that must be followed. Personal overdrafts are agreements for a fixed amount with no defined tenure. Personal loans must be repaid monthly, while overdrafts can be repaid any time a withdrawal is made.
Convenience
You may not be able to pay the full amount for certain expenses such as house renovations or working capital expenses. You might be better off getting an overdraft facility in these cases. You can withdraw only what you need and only pay interest on the amount used. It is not a good idea to withdraw all sanctioned funds and then pay interest while only using a fraction.
Ready Access to Funds
A personal overdraft allows you to access funds at any time without having to pay an EMI. You will only spend and take out as much as you need. This helps to build financial discipline. This means you won’t need to apply for loans on multiple occasions. You can withdraw money from your approved overdraft whenever you need it.
How do we apply for a personal loan from LoanTap or a personal overdraft?
LoanTap makes it easy to get a personal loan or personal overdraft. The rest of the process is the same.
You will need to meet minimum requirements to obtain either facility.
- Indian citizens or residents are eligible to apply
- Between 21 and 60 years old
- Your net monthly income is more than Rs 30,000
- A credit score of at minimum 680-730 is acceptable
You can advance to the next level if you meet the criteria. You can download the LoanTap app to your smartphone and complete the application. Details about your income, employment, and loan/overdraft amounts will be required. Upload your identification and income proof documents. These documents include:
- PAN Card
- Aadhaar Card
- Statement from the bank for the past six months
- Salary slips in the last three months
- If self-employed, IT Returns for the last 2 years
After completing this process, you can relax and let LoanTap review your application. Your loan/overdraft application will be approved if your valid documents and credit score are decent. The whole process shouldn’t take longer than 24 hours.
LoanTap offers personal loans/overdrafts starting at Rs 50,000 and ending at Rs 10,00,000. The term can be for 6 months or 5 years. You will need to withdraw the full amount and repay it in EMIs during the agreed term. An overdraft allows you to withdraw the amount as needed and pays interest for the actual period.
It is simple to get short-term finance. However, it is up to you to decide what is most important and choose the right option. You can withdraw as much as you need with a personal overdraft, which will help maintain some control. Both personal loans and overdrafts can be used in an emergency.
The stress of not having enough funds at the right time is eliminated by short-term financing. You could use it for a variety of purposes, such as:
- Medical emergency
- Your dream vacation
- House Renovation
- Course fees
- Fancy gadgets
- Electric vehicle
- Needs for working capital
- Consolidating credit card debt
You can solve short-term funding problems quickly by using personal finance tools. They are much more efficient than credit cards. Personal overdraft facilities are as good as credit cards but at half the interest rate. This will allow you to meet your needs quickly and without paying monthly interest at 2.5-3 %.
