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Differences you must know between bank overdraft and personal loan apps | 2021

3 min read

When you are confronting the fund crunch, you can come across to terms/options viz. bank overdraft and personal loan apps. Well, everyone and everything has two aspects in this world therefore you must perform a wise study before you go in favour of a certain side.

Bank overdraft and personal loans, both can be handy in your emergencies, although, you need to figure out which one helps you more conveniently and does not affect you potentially much in any way.

Both entities and individuals frequently need credit and this requirement has conventionally been fulfilled by the banks via their overdraft facilities and other large established financial institutions but since the technology has got advanced in last 2 decades to the next extent, Best personal loan apps have become much famous apart from traditional lenders such as banks.

Although, as there is an abundance of credit alternatives available in the market, choosing the best one amongst them would directly be relying upon the needs and priorities of the borrower.

Difference between bank overdraft and personal loan apps

The term ‘bank overdraft’ itself clarifies its definition; it is simply credit support from a bank that helps account holders to take out money even when they do not have the funds available in their bank account. It generally functions similar to a loan.

On the contrary, instant loan apps, such as Pay Sense personal loan app, NIRA loan app, afinoz loan app, etc. extend instant funds to customers through an online application procedure.

Let’s take a nearer view and perceive the better difference between both of them.

Eligible applicants

In order to avail a bank overdraft facility, you will need to meet certain eligibility criteria that are decided by your bank, you may be determined based on your repayment capability and the sort of collateral you’ll be promising against the bank overdraft facility.

You can avail the overdraft facility by pledging collateral such as shares, bonds, fixed deposits, salary, property, or your insurance policies.

Nevertheless, there are several consumers whose credit scores may not be adequate to avail the bank overdrafts or other conventional credit alternatives. This is where the instant personal loan apps land; loan apps such as PaySense, KreditBee, MoneyView, MoneyTap, Afinoz and many more extend simple access to instant funds to individuals without asking for any collateral to promise them against the required loan.

Therefore, today instant loan apps are comparatively preferred over traditional bank overdraft facility by a larger extent when it comes to avail funds instantly.

Withdrawal limits

In bank overdraft, the withdrawal limit is set by your bank on the basis of your repayment capability. Instant loan apps can also have varying withdrawal limits. For instance, EarlySalary allows a borrower to take out amount ranging from Rs. 8,000 to Rs. 5,00,000.

Although, in this perspective, bank overdrafts can stand out above the personal loan apps; they extend larger limits if you successfully and satisfactorily meet the eligibility criteria.

Fees and charges

On charges parameter, bank overdrafts stand out since you won’t be required to pay any charges besides the interest rate on the time and amount you use.

Although, you also need to know that if you surpass an agreed limit then you could come across paying high penalties. Additionally, it would affect your credit score.

On the contrary, instant personal loan apps can often have rates of interest and some other charges such as processing fees, prepayment charges, etc.


Choosing an instant personal loan app for fund assistance can rather be faster than opting for a bank overdraft facility. With the online application process and minimal documentation, you can get the approval on a loan instantly within a matter of seconds.

Conclusion: Which one to opt?

Choosing the one out of the two directly depends upon your needs. If you have a stable job with a good salary and you have a satisfying credit score, you may opt for a bank overdraft but if you don’t possess a good credit score, you may opt for loan apps. Besides, if you require immediate funds without hassles, instant personal loan apps extend a simpler online application process with instant approval.

MoneyTap, MoneyView, Afinoz, EarlySalary, kreditbee and CASHe are some of the leading and best personal loan apps in India that you can definitely rely upon in order to avail an instant personal loan.

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