Against salary, an FD or property, an OD limit sits at zero cost until used. Draw ₹1 lakh for ten days and you pay interest on ₹1 lakh for ten days, not on a sanctioned loan for three years. The discipline it demands is treating it as a bridge: an OD that stays fully drawn for a year is just a term loan wearing a convenient disguise.
Before you borrow
- Compare the total payable, not the EMI — a longer tenure always looks cheaper monthly and costs more overall
- Check the processing fee, typically 1% to 3%, which is deducted before the money reaches you
- Ask whether prepayment is allowed and what it costs, since most personal loans are fixed rate
Run your numbers in the EMI calculator before you commit to anything.