Credit line OD - The sole solution to cash needs

Posted by Trishya Sharma on September 20th, 2019

With a Personal Overdraft permits you to withdraw funds and repay funds at your beck and call. You have to pay interest on only the amount which is withdrawn. Hence you can repay part of the outstanding amount whenever you have some money and withdraw some money whenever you have a need.

Pay Interest on only what you use

Personal Overdrafts tend to have similar interest rates as Personal Loans but have a number of benefits over Personal Loans.

Quick Funds Release

To get a personal loan you have to deal with a lot of paperwork. Not to mention, you also need a decent Credit score to stand a chance of loan approval. Overdraft, on the other hand, is a simpler option.

Once you have done the initial set up of your Overdraft you can withdraw money with a couple of hours and definitely within one business day. If you take a Personal Loan whenever you need funds you Have to take the hassle of going to go through the same procedure everytime and will only get hands on the money after 3-5 days.

Flexibility

Personal loans don’t leave much room for flexibility. You have to pay a fixed EMI for the duration of the tenure and the payments also have to be timely. For many people, this could be a problem, especially for individuals who have a larger proportion of Variable Pay. One month they could be cashing one cheque after another, and the next month they might have to make do with the bare minimum. A personal loan is not ideal in such situations, but a Personal Overdraft can aptly resolve this issue.

A personal overdraft allows you to take as much money as you need (as long as it is within the limits set for you) and pay back as and when convenient. You can pay within days, weeks, or months- whatever fits your pocket.

Interest charges

Once you have taken a personal loan, the interest starts to accumulate immediately, even if you are not using the money at all. Consider an example in which you got a personal loan for higher education. However, as fate would have it, you made other plans and now the money you have is of no use. Since it makes no sense to pay interest on a loan that you don’t need, you decide to prepay it. Now comes the painful part: to pay prepayment fees, which can be quite high. Had you chosen to overdraft, however, you wouldn’t have to pay it. Also, most banks encourage their borrowers to take longer time for repaying the loans since the longer the tenure, the more profit they make on the interest. Needless to say prepaying so soon could also affect your CIBIL score. Again, with an overdraft, there is no such problem.

Protect your CIBIL Score

If you frequently take or repay loans, then your CIBIL score is bound to change frequently. Events like cheque bounces can cause your score to drop, in this case, you can also have a hard time obtaining loans or credit cards in the future. However, you can avoid this by choosing to overdraft. With this facility, you will have only one loan which you are regularly servicing. This will give a positive boost to your Credit Score.

Manage Only One Loan

If you take multiple Loans then you have to Manage the hassle of multiple institutions, loans, cheques, repayments. This is not only taxing but leads to a high chance of default and cheque bounces. A Personal Overdraft allows you to have just One Large Loan, One Single Payment and a lot less financial burden.

A Personal Overdraft allows you to withdraw funds and repay funds at your convenience. You have to pay interest on only the amount which is overdue. Hence you can repay part of the outstanding amount whenever you have some money and withdraw some money whenever you have a need.

Pay Interest on only what you use

Personal Overdrafts tend to have similar interest rates as Personal Loans and have a number of benefits over Personal Loans.

Faster Funds Release and Simplicity

To get a personal loan you have to deal with a lot of paperwork. Not to mention, you also need a decent CIBIL score to stand a chance of loan approval. Overdraft, on the other hand, is not only a simpler option, but it is also faster.

Once you have done the initial set up of your Overdraft you can withdraw money with a couple of hours and definitely within one business day. If you take a Personal Loan everytime you need funds you are going to go through the same procedure everytime and will only get hands on the money in 3-5 days.


Trishya Sharma

About the Author

Trishya Sharma
Joined: August 2nd, 2019
Articles Posted: 45

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