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A Comparative Study Of Overdraft And Loans

Welcome one another article on financial awareness topic. Here we are going to discuss some interesting facts about overdrafts and bank loans. An unsecured overdraft, as well as, loan both are facilities which are available in the financial market and provided by all the major lenders like- banks, NBFCs, etc. In order to be a successful entrepreneur earning money is not enough, you are supposed to use all the financial instruments very prudently to get commercial success in this ever challenging and ruthless world. In this particular article, we are going to discuss the significance of overdraft facility economic growth of our country. The concept of unsecured overdraft is prevalent for several years. Businessmen usually use unsecured overdraft loan to meet their day to day capital requirements and smooth functioning of their commercial activities. At Indifi you can get higher credit limits for the overdraft. We also provide an overdraft loan without any kind of security also.

Numerous people think that an unsecured overdraft is more or less similar to the bank loan. In case of unsecured overdraft loan the rate of interest is higher than conventional loans.

In this particular article, we are showing a comparative study between unsecured OD and loans. So without further delay let’s discuss some important facts unsecured business overdraft facility and compare them with the traditional bank loan.

  1. Unsecured overdraft facility is provided to individuals or companies, usually on their current account. If you go short in credit have insufficient balance in your current account as your requirement then you can withdraw the required amount through the overdraft facility. While in case of a loan, it is a fixed amount which is borrowed from a bank or any other financial institution like Indifi for a fixed period of time.
  2. In case of an overdraft, the interest is charged only on the amount borrowed not on the limit of overdraft. But in case of a loan, the interest is charged on the entire amount whether you use that amount or not, you have to pay the interest on the whole amount.
  3. Unsecured overdraft facility to businesses is beneficial for a short period of time with small amounts. Because of predefined credit limits, you cannot borrow a big amount for longer duration through overdraft. If you need big capital investment a bank loan would be recommended.
  4. Usually, an overdraft is considered an ideal for the working capital requirement. While in order to get paid-up capital for your business or expansion of business, it is recommended to go with prior approved business loans.
  5. Another interesting fact about business loans that it has a fixed repayment structure. If you have the excess amount then also you cannot repay your entire loan for once indeed, for the repayment you have to follow a particular structure. But in case of an overdraft facility, you can clear your dues at once and escape from on wanted interest amount.

In short, we can conclude that loans are ideal for planned purchases and big investments while in case of any emergency or day to day capital crunch you can avail overdraft facilities. Being a businessman you have to be prudent with your credit requirements and make optimum utilization of overdraft facility as well as business loans. Both of them have their own benefits and limitations, if you make prudent choices then you can utilize all these credit instruments very effectively and save your time and money.