Life can be unpredictable and sometimes you may face a cash crunch. Overdraft loans and instant loans are two types of loans that you can use in such situations.
These loans aren’t meant to be your long-term financial solution. Rather, they’re there as a short-term fix until your finances improve again.
So, is an instant loan better than an overdraft loan? Let’s take a look at what each of these loans offers and figure out what is better suited for you.
What is an Overdraft Loan?
An overdraft loan is a loan that you take out against your bank account. When you take out an overdraft loan, you have to pay a fee for the privilege of accessing your money.
You’ll also have to pay interest on the loan, which can be considerable if you don’t repay the loan on time.
Because this kind of loan is quite different from a traditional payday loan, there are several advantages and disadvantages to consider.
As an advantage, overdraft loans are often easier to get than traditional payday loans. They’re also less expensive in terms of fees and interest charges than traditional payday loans, so it makes sense to explore this option before you turn to a payday lender for financial help.
On the other hand, overdraft loans carry many disadvantages as well. First, they’re a short-term solution that doesn’t provide long-term financial stability.
Second, they can have high fees and interest rates that make them inaccessible to many people. Finally, not all banks may offer you the option of taking out an overdraft loan.
What is an Instant Personal Loan?
The instant loan is generally a short-term loan, ranging from one month to a year. It is offered by banks, NBFCs, and online loan apps. You can apply for this quick loan online and have the cash disbursed within days.
You’ll be charged interest on the entire amount borrowed and not just the amount used to take out the loan. You’ll need to repay the loan with a fixed monthly payment. If you miss a payment, you’ll incur a late payment fee and increase the amount you owe.
There are many advantages to using an instant personal loan as opposed to an overdraft loan. For example, you can receive money immediately, which can be very convenient for people who need cash in a short amount of time.
Additionally, there is no minimum credit score requirement for instant personal loans. These loans are also available from a wider range of financial institutions than traditional bank loans. Finally, instant personal loans typically have lower interest rates than traditional bank loans.
There are also some disadvantages to consider when taking out an instant personal loan. First, the interest rates on these loans vary from lender to lender.
So, you have to find an instant loan option that offers reasonable interest rates. Second, you must be able to repay the loan within the loan tenure which is shorter than traditional loans.
However, in most cases, the advantages of choosing an instant personal loan outweigh the disadvantages. If you need quick cash and don’t mind doing your due diligence, then an instant personal loan could be a good option for you.
Should you take out an instant personal loan or an overdraft loan?
An overdraft loan is typically a short-term solution that should be used to bridge a gap between income and expenses. Using an overdraft loan makes sense if you need to temporarily access a small amount of cash and are already approved for it.
If you need a slightly larger loan and can pay off the loan within a short period, an instant loan is a better choice. If you are in urgent need of cash and perhaps don’t meet the requirements for an overdraft loan, you can go for an instant loan.
Before making a decision, understand what your financial requirements are, research all your options, and go with the option that fits your needs best. You go this!
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