Personal Loan vs Overdraft - Comparison, Tenure Suits, Processing Time (2024)

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Highlights

Take a look at the comparison of Personal Loan and Overdraft.
Choose the debt that suits you best as per your requirement.
Check the differences on the basis of tenure, the debt amount, interest rate, and other bases.

There are a lot of individuals in India who prefer a debt in order to fulfil their needs. But the financial institutions give too many types of debt to their customers so it becomes confusing for them to choose one. So here you can see the major differences between the two important debts are Personal Loan vs Overdraft. A personal loan is given at a certain rate of interest and for a specific period of time without any collateral whereas an Overdraft is an agreement between the lender and the taker where the lender allows the account holder to withdraw excess money what is available in his account. You must take a look at the comparison of both of these debts.

Comparison of Personal Loan and Overdraft

Basis of Difference	Personal Loan	Overdraft
Meaning	A personal loan is a debt given by the bank at a certain rate of interest and for a long duration.	An overdraft is a facility given by the financial institution to their existing customers depending upon their account balance. They are allowed to withdraw excess funds other than the availability in their account.
Availability	In order to take a personal loan, you will have to go through a lot of verification process and submit the necessary documents.	Opting for an overdraft facility there is no need for any verification. The bank allows their existing customers to withdraw the excess amounts as a debt depending on your account performance.
Debt Limit	The amount of personal loans are usually high as compared to an O.D. because it for a longer period of time.	The debt limit of overdrafts is less than the personal loans because they are offered for a shorter period of time.
Interest Rate	Personal Loans have a predefined rate of interest at which the applicant takes a loan and they are usually lower than the Overdraft’s rate of interest.	The interest levied on the overdrafts is usually high than the personal loans and therefore people clear the overdraft debt quickly to avoid the interest burden.
Tenure of the Debt	The tenure of the personal loans is for a long duration and it can be up to 5 to 7 years.	The tenure of the Overdraft Facility is for a shorter period of time and it is usually cleared within a year.
Repayment	In a personal loan, the bank fixes a certain EMI depending upon the rate of interest, tenure, and principal amount and you will have to pay it on a monthly basis.	You can make the repayment of the overdraft facility anytime depending upon your income. You are not bound to repay the overdraft debt and you can pay it whenever you want to pay it.
Processing Time	If you are applying for a personal loan then it can take time to get processed. The bank will verify your documents, income, and many other things before giving you the personal loan.	The banks give the facility of Overdraft depending upon the eligibility of their customers so you can withdraw excess amounts from the bank anytime you want to withdraw.
Pre-Payment Charges	If you want to close your personal loan before the expiry of the tenure then you will have to pay the prepayment charges to the bank. The pre-payment charges may differ from bank to bank depending upon your relationship.	There are no extra charges for the prepayment of the Overdraft facility. You can clear your debt anytime you want to clear it.

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Conclusion

You have spotted the major differences between Personal Loan vs Overdraft and you have a clear picture of both debts. If you think that you can repay the debt in a shorter period of time then you must choose the overdraft facility. But if in case you want a longer period of time to clear your debt then the personal loan would be a better option. The ball is in your court and you will have to choose the debt depending upon your requirements.

Personal Loan Interest Rates March 2024
HDFC Bank	10.75% - 14.50%
ICICI Bank	10.75% - 19.00%
IndusInd Bank	10.25% - 26.00%
Kotak Bank	10.99%
RBL	14.00% - 23.00%
SMFG India Credit	12.00% - 24.00%
Standard Chartered Bank	11.49%
Tata Capital	10.50% - 24.00%

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