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Overdraft facility vs Personal loan: Which is better?

Which is better, a personal loan or overdraft? Look at the difference between overdrafts and personal loans to determine the best option for dealing with financial hardship.

There are many people in India who like debt to meet their needs. However, financial institutions give their clients so many types of debt that it can be confusing for them to choose one. Therefore, here you can see the main differences between the two major debts: personal loans and overdrafts.

Overdraft is an agreement between the lender and the borrower, and the lender allows the account holder to withdraw the surplus available in his account. You need to see a comparison of these two liabilities.


In order to take a personal loan from Florence Capital or any other lending company, you'll need to undergo a whole lot of verification techniques and post the essential documents.

Opting for an overdraft facility there's no want for any verification. The financial institution lets their current clients withdraw the extra quantities as a debt relying on your account performance.

Debt Limit

The amount of a personal loan is usually higher than the overdraft facility. Because it's a longer period. Overdraft debt limits are lower than personal loans because they are offered in the short term.

Interest rates

Personal loans have a given interest rate that the applicant borrows and are usually lower than the overdraft interest rate.

Interest on overdrafts is usually higher than on personal loans, so overdrafts are repaid quickly to avoid interest burdens.

Tenure of the Debt

The tenure of the personal loans is for a protracted length and it is able to be as much as 5 to 7 years.

The tenure of the Overdraft Facility is for a shorter time frame and it also includes cleared inside a year.


For repayment of personal loans, the bank sets a specific EMI that must be paid monthly based on the interest rate, term, and principal. Overdraft facilities can be repaid at any time according to income. You are not obligated to repay your overdraft debt and can pay it at any time.

Processing time

If you apply for a personal loan, it may take some time to process. The bank will check your documents, income, etc. before giving you a personal loan. Depending on the customer's eligibility, the bank recognizes the possibility of the overdraft, so you can withdraw excess money from the bank at any time.

Pre-payment option

If you want to terminate your personal loan before the prepayment penalty period expires, you will need to pay the prepayment penalty to the bank. Prepaid fees may vary from bank to bank depending on your business relationship.

There is no additional charge for prepaid overdraft facilities. You can settle your debt at any time.


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