What Is the Difference Between a Flexi Loan And a Personal Loan
Personal loans come in handy when you need funds in case of an emergency or just for personal use, like travel, gold purchase, or any other purchase of high-end goods. Since these are unsecured loans, the Personal loan interest rates are higher than other retail loans.
Once the Personal loan is sanctioned, the entire amount is credited to your Savings account, and the obligation will start on the whole amount, without you having the option to withdraw from the excess amount if any. Here is when Flexi loans come into the picture.
Personal loans can be taken as a standard term loan or a Flexi-loan by Overdraft. In Flexi loan, your overdraft account is set up with a limit up to which you can withdraw.
So, let’s say you have an overdraft limit of Rs.10 lakhs in your loan; you can withdraw funds when needed and make the repayment too.
Listed below are some features of Flexi loans distinguishing them from Personal loans taken as term loans:
1. Nature of Borrowing
A Flexi loan is an overdraft, which allows you to utilise funds up to the sanctioned limit. Flexi loans allow you the flexibility to withdraw funds as and when needed. Once the limit is set up, you are free to withdraw full or partial, as per your need. The interest will be applicable only on the amount withdrawn, unlike regular term loans, wherein you do not have the flexibility to choose the utilised amount from your loan account.
- Interest Payable
Personal loans availed as term loans attract interest on the total amount sanctioned, as you do not have the flexibility to decide the disbursement amount. In contrast, the Flexi loans give you this choice, and hence, the interest payable is much less and restricted to the amount withdrawn.
- Flexibility of repayment
In term loans, you need to pay EMIs as per the terms of sanction agreed upon – the EMI, which includes principal and interest components, regardless of the utilised amount. On the other hand, a Flexi loan will have the repayment wherein the interest will be payable on how much you have used.
Since this account can have both deposits and withdrawals, like a regular transaction account, the interest may come to much less when compared with a Personal loan. Some lenders give attractive offers on Flexi loans and personal loans. You can do a competitive analysis using the online personal loan EMI calculator and select the best option for you.
Benefits of a Flexi loan
A Flexi loan is a better choice than a Personal loan due to the following advantages they offer over and above the Personal loans:
- When the finance requirement is unclear, you have a fair idea that you may need funds, but there is still ambiguity about the amount required.
- When the funds are needed at different times, and not at once, since Flexi loan enables you to withdraw funds as per your need, and the interest is payable on this amount, you need not overthink planning and align your credit with expenses. It makes funds available to you ‘just in time.
- When you are expecting cash flows in the future, you may repay a good amount soon. This will allow you to deposit the excess amount in the overdraft account and still be available to you in times of need. Flexi loans, hence, give you the much-needed liquidity without the inherent cost involved.
To sum up, though Personal loans are known for high-interest rates, a bit of interest shopping may give you the best rates at attractive terms. Use the Personal loan EMI calculators to understand the repercussions of personal loan interest rate, tenure, and amount on credit availed. After all, financial planning is all about making an informed choice.