Are you in need of some quick cash but can’t decide on the kind of loan to go for? Banks and NBFCs cater to the needs of borrowers typically in two ways – personal loans and personal loan overdraft facility. Unlike personal loans, wherein you’re liable to pay a fixed EMI every month, a personal loan overdraft facility is different. It requires you to pay interest only on the amount of money that you utilize and for the period for which you borrow it. 

Here’s how both are different from each other: 

  Personal Loan Personal Loan Overdraft
Eligibility Personal loan eligibility criteria for most lenders is quite easy to fulfil. The applicant must be between the age of 22 and 58 years. Moreover, they should have work experience of at least one year. Also, they must have a minimum monthly income of Rs. 15,000. To be eligible for an overdraft facility, one has to be between the age of 22 and 58 years. They should have a minimum monthly income of Rs. 35,000 with a work experience of more than two years. Additionally, they should have been in the same job for at least six months.
Credit limit When you apply for personal loan, the lender agrees upon a fixed amount to lend. Once the loan has been issued, the limit cannot be changed. However, if you are availing the overdraft facility, you can withdraw any amount of money as per your requirement.
Tenure The tenure of the loan is usually longer than that of an overdraft loan. For example, it is around 12 – 72 months with Tata Capital. The loan tenure is relatively shorter. 
Interest rates As soon as the lender issues the loan, the borrower becomes liable to pay a fixed EMI based on the personal loan interest rates agreed upon by the bank and the borrower.  If the borrowers do not withdraw any money from the bank, they do not have to pay any interest.   
Prepayment charges If a borrower decides to repay a loan before the end of the tenure, prepayment charges are levied. This is an additional cost borne by the borrower. No prepayment charges are levied on the borrower.

An instant personal loan can help you meet a lot of your planned expenses. However, it may fail to meet your unanticipated financial needs. On the other hand, overdraft loan facilities come with the convenience of flexible payback options.

Both offer different benefits and meet different requirements. Depending on your needs, you can opt for a personal loan or personal loan overdraft facility from Tata Capital and get access to quick money, flexible tenure, and affordable interest rates.

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