Let’s say we want to buy a used car for $ 500, but we don’t have enough money, so we need credit. What better solution then to apply for a credit line with your overdraft or take out a personal loan?
Of course, this requires enough credit lines and banks do not always provide such a small amount of personal loans, but let’s look at what to decide between different loan schemes.
A personal loan is a standard loan, meaning that we can pay off our debt slowly over a fixed period of time.
If we are in urgent need of cash, then often only these two solutions are possible, but what is the choice between the two? Is a lower interest personal loan or an overdraft available without administration a good solution?
The sum depends!
The great benefit of an overdraft is that you always have to pay interest on your outstanding debt, which has always been reduced by the money we hold in your account. That is, our payment, which was not used at that time. Thus, our average debt may be lower, depending on our payment, than with a personal loan.
Of course, you only want to think of an overdraft with a low credit or a relatively high payment, ie a current account balance. But, for example, with a $ 500,000 loan and a $ 250,000 payment, there’s no difference between the two schemes if you both spend $ 54,000 to reduce your debt and spend your payment evenly throughout the month. Including all interest and costs, both loans may cost us nearly $ 48,000 over 10 months in addition to the principal.
What else can we choose?
If you do not necessarily need cash, you can use a credit card, which works in the same way as an overdraft, so you can keep your debt down with the money we currently have.
How can you get a loan?
If you need money, you may want to consider the following tips to give you a better chance of applying.
- Find the best personal loan in our calculator.
- If the banks with the best deals reject you, apply at your own, where you keep your account.
- Eliminate your small debts like overdrafts, credit card debt, etc.
- Involve a co-claimant.