Flexi Loan Vs Overdraft Vs Personal Loan:Â Often people need to take a loan, for this also many types of products are available in the financial market. If you want to take a loan for personal needs, then you have not only the option of a personal loan but also many other financial products that can meet your money needs. Here we are telling you about some such facilities like overdraft facility, flexi loan and personal loan. Knowing about them will make it easier for you to choose the right financial product.
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Be the first to know What is overdraft facility
When you do not have money in your account but you need money for financial needs, you can avail overdraft facility. In this, you can withdraw money from your account even when there is no money in it. Overdraft means that the bank sets an overdraft limit for you in which you can withdraw money up to a fixed limit. The bank charges interest on the amount you have withdrawn from the overdraft account. In overdraft, the bank gives you the facility to withdraw money whenever you want and you can repay it whenever you want according to your convenience. You can get money from the bank while staying within the pre-approved overdraft limit set by the bank. This is a credit facility linked to your bank account.
What is this dropline overdraft facility?
As the name suggests, this is an overdraft facility in which the total credit limit set at the beginning gradually reduces every month. This credit limit gradually becomes zero after the completion of your fixed tenure. In the dropline facility, the principal amount keeps decreasing from time to time. The bank or NBFC from which you have taken the dropline overdraft facility reduces this credit amount month by month, quarterly, six months or annually as per its policy.Â
Understand with example
Suppose you have taken an initial overdraft facility of 6 lakhs with a tenure of 3 years under the annual dropline plan. You can withdraw this 6 lakh rupees in one go or in multiple installments before the end of the year. In the dropline overdraft plan, the credit limit will reduce to 4 lakhs after the first year and to 2 lakhs after 2 years. After 3 years, when your fixed limit is exhausted, your overdraft facility will also reduce to zero. Consider it a mixed plan of term loan and overdraft facility.
What is a personal loan
A personal loan is a type of term loan that has to be repaid in the form of EMIs with a repayment option. A bank or financial institution issues you a lump sum amount for a specific reason. The loan taker gets the entire loan amount upfront and repays it in installments.
What is a Flexi Loan
This is a type of personal loan in which NBFC or bank gives a pre-approved loan to the customer and deposits it in their bank account. The customer can use it whenever needed. It can also be called a type of overdraft facility in which more money can be withdrawn from the account than the credit limit received from the bank/NBFC. Customers can also pre-pay this loan as per their convenience. One special thing about this is that interest will be charged only on the amount withdrawn from your flexi loan account. Interest will not be charged on the remaining amount.
Flexi Loan, Overdraft or Personal Loan – Which is best for you?
Flexi loans have low interest rates and are easily available, so this can be a good option for those who want to withdraw more money in a short period of time. It has the option of fixed pre-payment, so if you do not see money in the near future, then you can choose this option.Â
Overdraft facility is good for those who have intermittent cash flow and can use the credit facility whenever they want.Â
Personal loans should be taken for specific needs such as home renovation, medical expenses, travel and the loan amount can be used to repay debts. However, personal loans are less recommended as their interest rates are more expensive.
