In times of unexpected financial crisis, the options most considered for quick funds are overdraft facilities and instant personal loans. While both offer immediate relief, understanding each option is crucial to making a final decision based on your financial situation.
In this blog, we’ll learn more about the two services offered, explore key differences between overdrafts and instant loans and help you decide which option is right for you.
Understanding Instant Loans
An instant loan is a personal or unsecured loan in which you borrow a fixed amount to cover large, unexpected or planned expenses. These loans are designed to offer immediate financial assistance with minimal documentation. They are typically approved online and provide a seamless loan application process with fast disbursement of funds.
Here are the key highlights of instant loans:
- Quick Approval: The application process is relatively straightforward, so you can quickly get instant loans online with minimal to no documentation.
- No Collateral Required: Instant loans are unsecured, and you don’t have to worry about keeping assets as collateral or security.
- Flexible Repayment Tenure: Lenders generally offer personal loans that allow borrowers to choose a repayment tenure that aligns with their goals.
- Competitive Interest Rates: Instant loans typically come at competitive rates slightly higher than overdraft facilities. However, you can negotiate the same based on credit score or have a good relationship with the lender.
- Fixed EMI Payments: In personal loans, you pay a fixed monthly amount as repayment over a set tenure.
Understanding Overdraft Loans
An overdraft loan, also known as an overdraft facility, is a service offered by banks allowing their account holders to withdraw money even when the balance is zero. It helps to manage daily expenses seamlessly when you fall short of cash. The facility comes with a pre-approved limit, within which you can withdraw whenever necessary.
Key features of overdraft facilities include:
- Interest on Amount Used: Borrowers are required to pay interest on the amount they are withdrawing from the overdraft facility.
- No Monthly Payments: As per bank terms and conditions, you can repay the amount whenever you have money.
- Credit Limits: Banks generally offer pre-approved limits based on creditworthiness, which are best for covering smaller day-to-day expenses.
- No Collateral Required: Banks offer this as an added facility to their account holders and hence don’t require collateral as a security.
Instant Personal Loans Vs Overdraft Loans
Considering both financial services offer quick relief and help to cover unexpected expenses, here are some factors to know the difference between the both:
- Nature of the Loan: In an instant personal loan, the lender transfers a lump sum of money to the borrower’s bank accounts. While you can withdraw the sum from an overdraft facility whenever necessary, it should be within the pre-approved limits. Overdrafts are convenient for short-term daily expenses, as they are linked to your bank accounts.
- Rate of Interest: When you take instant loans, the interest rate is typically on the entire amount. On the other hand, the interest charged in overdraft loans is on the sum you withdraw.
- Approval of the Loan: Trusted lenders generally approve instant loans quickly, especially when you have a good credit history and a long-standing relationship with the provider. While in overdraft facilities, once the bank approves the limit, you can use the sum whenever you want.
- Fees and Other Charges: An EMI instant loan involves other charges, including processing fees and prepayment penalties, and if you are using an overdraft facility, then banks often charge fees for using it.
- Amount of Loan: If you need a large amount of money to cover expenses like medical bills, home renovations, or planning a dream vacation, apply for an instant loan. Overdraft loans are mainly used to cover short-term daily expenses.
- Eligibility: If you are a first-timer, you can also apply for an instant loan, as some lenders don’t ask for a credit score in that case. However, overdraft services are mostly offered to those with a good credit history.
Stashfin: Your Trusted Partner for Instant Loans
When applying for an instant loan, Stashfin stands out the best for its wide range of financial services. With Stashfin, you can enjoy benefits like up to 30 days of interest-free period, up to ₹5,00,000 credit limit at competitive rates, flexible repayment tenure, transparency in terms and conditions, minimal documentation, and a user-friendly interface for easy navigation and quick and convenient instant personal loan processing.
Whether you need funds for medical emergencies, urgent home renovation, planning a wedding or going on a dream vacation, Stashfin offers seamless loan application and quick approval. With this, you can look at some of the best insurance options on the website or app.
Which Option is Better?
Choosing between an instant loan or an overdraft facility depends on your needs and financial goals.
- If you want a large amount of money, are a first-timer, and prefer a structured EMI repayment schedule, opt for an instant loan.
- An overdraft facility is best for those who want funds to cover their short-term expenses and already have a bank account with a pre-approved credit limit.
Conclusion
Both instant personal loans and overdraft facilities are good options if you need funds to cover immediate expenses. If you need a large sum, apply for an instant loan, and if you need money for day-to-day expenses, choose overdraft services.
It is always advisable to analyse your financial situation, read the documents, learn about all the terms and conditions, and make a final decision.
