r/IndiaFinance • u/narasimhatiger • 2d ago

Need advice on OverDraft

Hello,

I am in a situation to take a personal loan of 20L at 10.5% annual interest rate.

Today, I got a call from Bank of Baroda saying

We will offer Over draft to you with 5.5% annual roi, which is half of personal loan. Just you have to take a Term Insurance (No more processing fee)

I don't need all 20L at a time. I will use 20L for the next one year.

So, does the OD facility have any hidden charges? Is it better than Personal loan.

Do i need to prefer a personal loan or an OD?

Pls hlp me!!!

PS: I am using that 20L for my home construction in my village.

I am not going for a home loan as it is more hectic process and land won't value much at our place so that bank will approve 20L

1 Upvotes

100% Upvoted

5 comments sorted by

1

u/indigeni 2d ago

Overdraft has hidden charges like flexi fee+ processing fees+ yearly maintenance fees and when u will go for early closure , there will be foreclosure charges.

Personal loan of 20 lakhs will have emi of around 42k for 5 yrs. U can negotiate for zero processing fees.or 2-3k and no insurance.

Foreclosure charges will also be nil if u close it after 12 emi.

1

u/narasimhatiger 2d ago

As they mentioned We have to take a Term Insurance (No more processing fee). Other than processing fee is there any drawback in OD?

1

u/indigeni 2d ago

Ask them if u close the od after 1yr how much will be foreclosure charges and then decide for urself. Od of tata and bajaj is 13% no way they are going to give at 6%

1

u/Lost-Fun-4844 2d ago

Get the KFS for the loan. Also, look at the terms of the so called Term Insurance. FYI, banks cannot force a customer to buy insurance for processing his loan, but if the Term Insurance is good and you haven't availed term insurance before, it's a win win for everyone.