Moneycontrol
Nov 15, 2016 08:15 AM IST | Source: Moneycontrol.com

Five reasons why personal overdraft is better than payday loans

Payday loans can turn out to be extremely expensive for you due to the high-interest rates and a lot of other hidden reasons. Instead, a personal overdraft is a better choice to make where a borrower can get credit on-the-go without any tedious formalities and paperwork.

Satyam Kumar
LoanTap

Who doesn’t want a reliable friend who can lend us some much-needed cash whenever we ask for it? Well, the good news is, it is possible with options like personal overdraft facility and payday loans through new-age lending platforms. Confused which one to opt for? To some of you, a payday or advance salary loan might seem to be a good option owing to its benefits like no credit check, no upfront fees, easy application process, quick processing & transfer. But it’s not all so hunky-dory.

These short-term loans can turn out to be extremely expensive for you due to the high-interest rates and a lot of other hidden reasons. Instead, a personal overdraft is a better choice to make where a borrower can get credit on-the-go without any tedious formalities and paperwork. This amount can be repaid as per convenience. Not only does it provide easy financial assistance during emergency situations, with an overdraft facility, one can avoid checks getting bounced when funds are insufficient. This also prevents one’s CIBIL score from being affected. If that is not enough, here are five more reasons to zero in on personal overdrafts over a payday loan that will make room for you to navigate through any tight financial situation:

No restrictions

When we talk about payday loans, they can be taken for a short period and the loan amount will be small as well, ranging to a maximum of Rs 40,000. As a result, the tenure allowed for this loan becomes short too i.e. between 5 days to 2 months. However, a personal overdraft facility comes with a repaying tenure of as long as 60 months followed by higher withdrawal limits on the borrower’s account that can go above Rs. 50,000. Unlike payday loans that come with a limitation, personal overdraft brings no restrictions in the amount or duration when one needs to pay the money back.

Low rate of interest

Payday loans not only come with high interest rates going up to 30%, but the rules associated with them can be quite merciless. A significant amount of penalty is charged when a borrower fails to repay the loan within the tenure. Personal overdraft, on the other hand, is easy on the pocket with affordable interest rates. One can withdraw money exactly when it is required.

Employment criteria

To avail a payday loan, a borrower must be working in a full-time setup. A part-time or self-employed person will not be eligible for it. However, a personal overdraft facility can be extended to anyone, regardless of their nature of employment.

Flexibility

Those in favour of payday loans would be disappointed to know that they do not come with flexibility. This means, a borrower would have to pay the loan within a short period of time as mentioned, along with the fixed fees and interest. Let’s call it a shrewd landlord eagerly waiting for the rent, waiting to slap a fee even for a one-day delay of the payment. Personal overdraft, on the other hand, is like your best friend who lends you money and doesn’t goad you for it every day. There is no pressure of repayment in this case and borrowers get the flexibility to repay as per their convenience.

Speedy access and faster disbursal

Technology has changed our world in many ways with almost everything accessible through the internet, which means one does not have to head to a financial institution to apply for loans. Well, this leisure comes to those who have a personal overdraft facility. Yes, you heard it right. You can apply for a personal overdraft from the comfort of your home. All you need to have is a computer or a phone with internet access and fill up the online form that asks for basic details. Funds are released within 24 hours after the completion of the verification process. Can it get easier than this?
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