When faced with unexpected financial obstacles or planning for some significant expenses, individuals often find themselves in a haystack, debating whether to opt for a personal loan or rely on an overdraft facility. Both of these financial instruments have their pros and cons, and choosing between them requires a careful assessment of individual circumstances and financial goals.
In this blog, we’ll dive deep into the intricacies of personal loans and overdrafts, exploring their characteristics, advantages, and disadvantages to help you make an informed decision.
Understanding Personal Loans
As the term implies, it is a common form of unsecured lending offered by financial institutions. These loans provide potential borrowers with a handsome lump sum amount that can be used for various purposes. The key features include fixed interest rates, monthly payments, and a predetermined loan term.
Advantages
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Structured and Framed Repayment Plans
An instant personal loan comes with fixed tenure, making it relatively easy for borrowers to budget and plan their finances. This kind of predictability helps borrowers to manage their monthly cash flow much more effectively.
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Lower Rate of Interest
These loans offer lower interest rates than other unsecured debt forms, such as credit cards. However, at Stashfin, we don’t charge any interest on the loan amount, which means you have to pay back the amount you borrowed from us.
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No Collateral
These loans are unsecured, meaning borrowers are not required to pledge collateral, such as a car or a house. This makes it quite accessible to a broader range of individuals who may not possess valuable assets to secure a loan.
Understanding Overdrafts
For those who are not aware, it is basically a financial instrument that allows individuals to withdraw more money from their bank account than what is available. It is essentially a form of short-term credit offered by banks, which is usually linked to a checking account.
Advantages
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Flexibility
It offers complete flexibility in managing day-to-day finances. They act as a safety net, allowing individuals to make necessary payments even when their account balance is insufficient.
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No Fixed Schedule for Repayment
Unlike personal loan, they do not come with a fixed payment schedule. Therefore, borrowers have complete control over the flexibility to repay the overdraft when their financial situation improves within the agreed-upon terms and conditions with the bank.
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Instant Access
Overdrafts provide instant access to funds, offering a timely solution for immediate financial needs without those lengthy application and approval processes.
Personal Loans or Overdrafts. Which is preferable?
When you need financial assistance, personal loans are one of the most preferred ways in 2024. At Stashfin, you can avail of this instrument with just a few taps with our Android/iOS application. We offer such loans without charging any interest, and the borrowers here need to pay back the same amount they borrowed from us.
However, while overdrafts provide a quick financial fix, personal loan in emi emerge as the more preferable choice for those looking for long-term financial stability.
Conclusion
All in all, personal loans emerge as the preferable choice for individuals seeking financial stability and wellness. The structured repayment plans, competitive rate of interest, and potential for debt consolidation make an instant personal loan an innovative and empowering option.