Whenever you opt for a loan, it is important to consider the weight of your situation. If it is something you need to invest in in the long run, you may choose to opt for a certain kind of loan.
Again, if you are facing an emergency, you might need a loan instantly. In this blog, we will talk about the difference in type and utility between overdraft loans and instant loans, so that you can make an informed decision before taking a loan according to your budget and situation.
What is an overdraft loan and how does it work?
If you take an overdraft loan, it will provide you with a revolving limit of credit that is linked to your bank account. Thus you can draw even more than the available balance as long as that does not exceed the approved credit limit.
Interest is only charged with the amount withdrawn, and this provides you the scope for cost-effective financing. You can repay the amount according to your convenience and can renew the facilities as long as you are handling your account responsibly.
Who should ideally opt for overdraft loans?
If you win a business that sees fluctuation in cash flows from time to time, you can definitely opt for overdraft loans, as these provide a safety net in times of crisis when the expenses exceed funds for such businesses.
Other than that, you can surely use overdraft loans when you need to manage working capital in your business or handle uncalled-for expenses.
What is an instant loan and how does it work?
An instant loan is a kind of loan that you can apply for in times of emergency when you need instant access to a lump sum amount.
You can apply for instant loans easily through portals on the web or even mobile apps. The process of approval and disbursement for instant loans is expedited, providing you with instant access to a lump sum amount.
When should I ideally take an instant loan?
If you have to suddenly pay an unexpectedly lengthy cash bill, if you are in a medical emergency that needs a huge amount of money, or if you need to make an urgent visit abroad that requires a huge amount of funds, you can opt for an instant loan.
You can also carefully plan your budget while repaying an instant loan, as you can repay this in fixed installments in a structured and predisposed way. As a borrower, you will have extra clarity as instant loans will always come with a fixed payment schedule. You will have your monthly installments fixed according to the amount and tenure of the loan.
Conclusion
There are quite a few differences between overdraft loans and instant loans in terms of discharge of amount, cash withdrawal terms, and repayment tenure. In order to understand which is best for you, you should carefully assess your situation and budget. This will help you decide accordingly.
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