5 Reasons Why a Personal Overdraft is Better than a Personal Loan?

Personal loans and overdrafts are two types of credit that financial institutions

often offer to their clients. While you can satisfy your financial needs with either choice, there are some significant distinctions between the two. In this article, we’ll look at 5 reasons why a personal overdraft is preferable to a personal loan.

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It might be difficult to manage your money, especially when you require a little additional money. You can consider borrowing alternatives for a budgeted expense or an immediate necessity. Personal loans and personal overdrafts are two popular choices. Personal overdrafts have several advantages over personal loans, even though both might assist you in accessing the money you need. These five factors indicate that a personal overdraft might be better for you.

5 Reasons Why a Personal Overdraft is Better than a Personal Loan?


One of the main advantages of a personal overdraft is flexibility.With a personal loan, you borrow a set sum of money you must repay over a predetermined period with a predetermined interest rate. This means that you have to plan your budget around your monthly loan payments, which can be hard if you have to pay for something unexpected.

But, if you have a personal overdraft, you are given a credit limit that you can use as needed. You can borrow more or less money based on your needs because you only pay interest on the amount you utilize. This can be especially helpful if your income is inconsistent or you are unsure of how much money you will need shortly.

Flexibility is one of the key benefits of a personal overdraft. A personal overdraft is a line of credit you can access as needed, as opposed to a personal loan, which provides you with a lump sum of money you must repay over a certain period. As long as you stay within the predetermined limit, you pay interest on the amount you borrow and are free to repay the loan whenever possible.

If you’re unsure how much money you’ll need or when you’ll need it, this flexibility can be extremely helpful. Instead of taking out a huge loan all at once, you can borrow little amounts as and when you need them with a personal overdraft. This can assist you in better money management and help you avoid taking on more debt than you should.

Lower interest rates:

Interest rates for personal overdrafts are frequently lower than those on personal loans. This is because interest is only assessed on the portion of the loan you utilize rather than the total amount. This means that a personal overdraft may be more affordable than a personal loan if you simply need to borrow a small sum.

A personal overdraft also has the benefit of often having cheaper interest rates than personal loans. This is because interest is only assessed on the loan portion you borrow. As a result, even if you borrow the same amount of money, you can pay less interest over time.

Personal overdraft interest rates are also frequently variable, which means they might change according to the state of the market. If interest rates decline, this could work to your advantage since your borrowing costs will go down. It’s crucial to keep in mind, though, that the interest rate could also increase, so you should be ready for the possibility of future price increases.

No fixed repayment schedule:

Over the whole loan term, you must make fixed monthly payments on a personal loan. This may be a strain if you have unforeseen expenses or fluctuating income. But if you don’t exceed your credit limit, you can repay the money you borrow with a personal overdraft at your speed.

This implies that you can repay more than the minimum amount if you have a good month and can do so without paying any fines. On the other hand, you won’t be penalized if you have a terrible month and can only afford to make a minimal repayment.

Personal overdrafts do not have a predetermined repayment duration, in contrast to personal loans. Instead, as long as you don’t exceed the agreed-upon limit, you can repay the money anytime. This can give you greater control over your money and relieve some of the pressure associated with needing to make repayments on time every month.

Also, personal overdrafts may be helpful if your income or expenses fluctuate. A personal overdraft, for instance, can assist you in managing your cash flow during tough times if you work in a seasonal industry and your revenue fluctuates throughout the year. A personal overdraft can also free you to borrow money as needed to cover irregular expenses like medical bills or auto maintenance.

Easy access to funds:

With a personal loan, you must go through a drawn-out application process that could take days or weeks. If you require the money immediately, this may be frustrating. Yet, with a personal overdraft, you can immediately access the money. As long as you don’t exceed your credit limit, you can immediately spend the money you’ve been permitted to use as an overdraft.

Better credit utilization:

Finally, a personal overdraft can lower your credit use ratio. This is the difference between how much credit you have available and how much credit you are now utilizing. Your credit score may be impacted negatively by a high credit use ratio.

With a personal overdraft, you have access to a revolving line of credit, so as long as you keep within your credit limit, you can borrow and repay as much as you need. Doing this may keep your credit utilization ratio low and preserve a high credit score.


For several reasons, a personal overdraft may be preferable to a personal loan. More flexibility, lower interest rates, no set payback plan, simple access to cash, and the ability to lower your credit usage ratio are all features it provides. As with any credit facility, it’s important to use a personal overdraft the right way and only borrow money you can afford to pay back. I hope you got all point about sbi personal loan interest rate, instant loan and quick loans etc. from above article.

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