Individuals in search of immediate funds from banks would be quite interested in learning about the prime difference between Overdraft vs term loan. This information is important to judge which one in better, when there is any sort of monetary hassle in your life. The major dissimilarities are mentioned as follows:

• An overdraft option is a form of credit which is offered to an individual or organization based on a current account. In addition, the amount which is withdrawn varies depending on the customer’s requirement. However, a regular loan talks about a fixed amount that is borrowed from a specific bank highlighting a stated repayment duration
• Considering an overdraft, the rate of interest is charged specifically on the borrowed overdraft amount and not on the stated limit; however, for a regular loan, the rate of interest is applied on the whole amount borrowed, regardless if it is completely utilized or not
• Generally, an overdraft is accessed for a lesser duration and the candidate isn’t allowed to borrow large amounts due to limits on credit. On the other hand, a loan is accessible for a longer period, ranging from 1 to 10 years, with the availability to take large sums
• An OD is ideal to fulfill working capital needs such as daily fund requirements. However, loans prove beneficial for capital investments such as new buildings, new machinery, etc.
• Under OD facility, payment option would be made possible in a lump sum which can be shut anytime. However, the customer’s credit limit can differ subject to his/her credit score. You can call it more flexible when considering the payment scheme. With regular loans, EMIs are involved that need to be paid on a schedule. If the EMI payments are not made timely, it can harm the customer’s credit ratings