Overdraft or Personal Loan? Choose Wisely to Avoid High Interest

• Overdraft (OD) offers a flexible credit line where interest is charged only on the amount used, suitable for uncertain or small, recurring expenses.
• Personal Loans (PL) provide a lump sum with fixed EMIs over 1-5 years, ideal for planned, larger expenses like home improvements or debt consolidation.
• OD interest rates can be higher (15-20%) and risk overspending, while PL rates (10-18%) depend on credit score but involve EMI pressure.
• Choose OD for short-term cash flow needs or business crunch; opt for PL for long-term, fixed financial goals.
• Maintain a credit score of 750+ and ensure EMI/OD payments do not exceed 50% of monthly income to avoid financial strain.

Why It Matters: Choosing OD or PL wisely prevents expensive interest traps.