Who has never been in the red that throw the first stone. Fortunately, the market has many alternatives for those who need money in an emergency, whether it’s paying off debt or even buying something.
Even unconsciously, we tend to prefer credit arrangements that provide the smallest bureaucracy possible. Among the many alternatives, we can mention two as an example: the personal loan and the overdraft. But which is the least expensive? What are the differences between the two? Find out following the article which is the best option for your pocket.
Overdraft is a non-mandatory form of credit that is tied to the bank account. When the user opens an account a credit analysis is made to determine how much will be available on the overdraft, ie according to their financial credibility.
Watch out for the catch
However, this option can be a trap. This is because the money is made available in addition to your account balance, meaning it creates a false illusion that this is a “guaranteed” balance. The consequence is simple: If you have no control over your finances, the debt is likely to turn into a snowball and you simply cannot repay it.
The tip for anyone choosing the overdraft, so be aware of the exact amount in your account. With this control, you do not risk using overdraft credit unknowingly.
Unlike the personal loan, there is no specific date for you to pay off the overdraft debt. However, this type of credit has the highest interest rates in the market – they usually start running on the first business day of each month. In 2018, this average interest was 13.26% per month.
The personal loan is a service offered by banks and financial institutions, in which the client requests a value and this institution makes a credit analysis before the loan is made.
This type of loan is becoming increasingly popular. One of the advantages over overdraft is over interest: at private banks, rates vary from 4 to 10%, at least twice as much over overdraft.
In addition, personal lending is becoming increasingly practical with the advent of online lending. Many fintechs offer this service, which makes life easier for people with little time to go to a bank branch to apply for a loan. As if that were not enough, the bureaucracy is usually smaller and the interest rates are even lower.
Obviously, there are still people who are afraid to do this kind of transaction online. However, this mode is quite safe, and you even have the option of researching the reputation of the credit provider company on the internet. The online personal loan is ideal especially for those who need smaller amounts, be it for debt or some kind of unforeseen event.