Banks extend customers a credit line to allow them to withdraw funds more than their account balance.
Loans offered by banks and other financial institutions in a lump sum are called personal loans.
Customers must submit an application and other documents for a personal loan, while overdrafts allow for withdrawal at any time.
Personal loans have a predetermined interest rate once sanctioned; overdraft facilities charge interest when funds are withdrawn.
Personal loans have a fixed amount, while overdrafts allow for varying withdrawals based on individual needs.
Personal loan repayment tenures can last up to seven years, while an overdraft facility typically lasts a fortnight or a month.
An overdraft facility is more flexible as it is at the account holder’s discretion; personal loans are paid through fixed EMIs.
A personal loan has a prepayment charge, while overdraft facilities usually do not have prepayment charges.
Compiled By Himani Verma