Personal Loan Vs Business Loan

Overdraft vs Personal Loan: Which is better?


Overdraft vs Personal Loan: Which is better?

Overdraft vs Personal Loan: Which is better?



The worst thing about emergencies is that they are unpredictable. In such unforeseen times, you may need a sizable amount of funds at short notice. If you want to raise funds through banking channels, you have two options: Overdraft and personal loan.

Which is better: a personal loan or an overdraft? Let’s dive into the difference between an overdraft and a personal loan to determine the best option for you to deal with your financial emergency.


Overdraft Vs Personal Loan

Is an overdraft better than a personal loan? Or is it the other way around? Find out the differences to make an informed decision. Here’s overdraft vs personal loan:



A personal loan is a fixed amount that is borrowed from the bank for a fixed period of time and has to be repaid in regular monthly installments.
An overdraft is a credit facility offered to an individual or company to withdraw an amount greater than the balance in the current account but up to a certain credit limit.


Source and Type of Funds

A personal loan is borrowed capital and is classified as an unsecured loan. It is usually taken for addressing a need for immediate funds, but it offers the benefit of repaying it over a longer loan tenure.

On the other hand, the overdraft is a credit facility and offers short-term repayment terms.


Interest Calculation

The interest rates on personal loans are variable, calculated on a monthly basis, and are charged on the entire loan amount.

The interest rate on the overdraft facility is calculated on a daily basis and charged on the amount overdrawn from the account. If you do not overdraw any amount, no interest will be charged. Moreover, the interest rate on overdrafts is higher as compared to a personal loan.

Speed of Disbursal

The personal loan follows a process that involves checking the eligibility, submitting the documents, vetting, verifying, and then approving. The process can take a few hours to a few days.

Overdraft funds are available within a few hours or may take up to a day.


A personal loan is repaid to the bank through easy monthly EMIs, usually via direct debit. You can determine your EMI amount with the help of a personal loan EMI calculator.
On the other hand, the repayments of the funds taken from the overdraft facility have to be done through bank deposits in the account.

Loan Tenure and Applicable Charges

A personal loan usually has a repayment tenure ranging from 2 months to 5 years. Additional charges like prepayment fees, processing fees, etc., may be applicable for personal loans.
However, with an overdraft facility, there is no fixed repayment tenure. No additional charges such as prepayment fees or processing charges are applicable on bank overdrafts.

It’s important to know the difference between an overdraft and a personal loan to make an informed decision. If your choice is leaning toward a personal loan, MoneyTap offers personal loans on the best loan terms. Reach out to MoneyTap for all your personal loan needs.


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