Personal Loan x Overdraft
In times of need we resort to credit alternatives that provide the least bureaucracy possible, such as personal credit lines.
But we do not always know what we will face in the future by using one of these lines, as some situations in our lives call for drastic measures.
Among personal credit lines, overdraft is the one that has the least amount of paperwork, as you use it as soon as your bank account is red. But that does not mean that this line of credit is the best in emergency situations as there is a high price to pay for using overdraft. Check out everything you need to know about overdraft and personal loan:
This line of credit is a banking service offered by financial institutions. This service is linked to the bank account and can be used by the user whenever their account is negative. When the user opens an account, the financial institution performs a credit analysis and determines through a customer profile analysis how much overdraft will be available. The amount will be equivalent to the financial credibility of each user.
Now we get to the part that a lot of people get confused! The amount of the overdraft is automatically added to the bank account balance. That is, to know exactly the balance of your bank account you need to discount the amount of overdraft, which is the service provided by the bank. By adding the amount of the overdraft to the user’s balance, banks outline a strategy of confusing users to the point where the service is used unnoticed.
Therefore, the tip for those who have this type of pre-approved credit is always be aware of the exact amount of the balance in the account not to end up using the credit without knowing. When viewing the statement you can see that there is a breakdown of the actual account amount and the amount of the overdraft. However, if you only see the total balance, you have the mistaken view that there are more values in your account than you thought.
The personal loan, on the other hand, has a little more bureaucracy to be hired because it needs a credit analysis to be approved. This type of loan is widely used by people who need money to repay larger debts or who need to buy certain property that cannot be financed. Through credit assessment, the bank determines the maximum amount to be borrowed and the interest that will be charged on the loan.
Nowadays this type of loan can be made over the internet, which makes life much easier for people who do not have time to visit a bank branch. In the case of applying over the internet, bureaucracy is smaller and simpler than personal loans made directly at bank branches.
Features of Overdraft and Personal Loan
That the two are different, we already know, check now what are the biggest features that differ the personal loan overdraft:
Overdraft General Rules
In this type of personal credit the user does not have a specific date for the payment of the amount used, which differs from the personal loan. However, interest on this line of credit increases as the overdraft is used by the customer.
Some banks offer the interest-free overdraft option within a few days, allowing users to borrow money quickly and pay within that time without interest. But be aware that this interest-free payment term is short, so always be aware of the peculiarities of your credit line.
General Rules of Personal Loan
This credit line is more bureaucratic, so that the applicant has to wait a while to get the money, which is quite different from the overdraft that has the pre-approved money.
The personal loan has the same characteristics as other loans, because it has a right date for payment, installments already defined and interest rate stipulated at the time of contracting.