The overdraft facility or overdraft facility is provided by banks if the customer has a regular income. It is not uncommon for up to three net monthly salaries to be paid. The bank also provides the customer with a loan, but it is expensive to pay. The interest rate level does not allow the overdraft facility to be used for a long time and nothing to be repaid. In many cases it is advisable to use a loan despite the overdraft facility.
The overdraft facility – the debt trap
Especially when the customer overdraws him over and over, leaves nothing behind and considers him practically as a second income, he has sooner or later got himself into a debt trap. Because the disposition is an expensive pleasure. Banks pay dearly for their generosity. The customer can expect a double-digit interest volume. If he then exceeds the approved credit line, interest will accrue again.
There are not a few customers who have managed the overdraft facility for years to come. Banks do not comment on this, although it is their duty of care to advise customers to better convert the overdraft facility into an installment loan. You don’t want to accuse the bank of anything bad, but it doesn’t earn enough from it. Either way, as soon as the bank stops making transfers because there is no cover in the account, a loan should be considered despite the overdraft facility.
The overdraft facility is a good solution for short-term financial bottlenecks. Customers who handle it carefully will also take it back. It is intended if, for example, an urgent invoice flutters into the house at the end of the month, which has to be paid quickly but the account is empty. Then the disposition is helpful, that’s what it is intended for. If the salary is not always on time in the account, the overdraft facility can also be helpful. This prevents the customer from not being able to pay his debts.
With bad Credit Bureau also a disposition?
The provision of the overdraft facility is handled differently from bank to bank. For example, if the customer has negative entries in his Credit Bureau, the bank will in most cases not approve an overdraft facility. Then it depends on what the characteristics are, soft or hard.
Soft features include reminders, dunning notices, account closures. The hard features include foreclosure measures, oath of disclosure and bankruptcies.
If the customer has a soft characteristic, the bank can agree to set up an overdraft facility. This is often decided on a case-by-case basis. The overdraft interest, as mentioned before, ranges from 6% to 16%. If the credit line is overdrawn, the bank charges another 5% in interest. An installment loan is much cheaper than the overdraft facility.
A credit despite overdraft can also be successful with a negative Credit Bureau and the customer should then look for the Credit Bureau-free loans. It is important to know that this type of loan usually involves a credit intermediary. The intermediary arranges the Credit Bureau-free loan. The money comes from abroad. The loan amount is limited. Mostly 3,500 dollars or 5,000 dollars are approved depending on the creditworthiness.
If the customer is single, he must have an income of at least 1,200 dollars net. The bank thus has an attachable share of around $ 80.00. These loans will not exist without a permanent job. Temporary employment contracts or trial periods are also not recognized.
The credit despite overdraft – the solution?
The overdraft facility is the ultimate debt trap. This is proceeding slowly, the bank calculates interest every quarter. If the customer does not pay off, he receives an interest invoice for the overdraft facility four times a year. The end of liquidity is then in sight. As soon as the salary no longer covers the overdraft facility, it should be converted into an installment loan. The credit despite the overdraft facility is then the only way to bring the finances back into order.
If a loan is taken out despite the overdraft facility and the overdraft facility is covered with it, it would be better to delete the overdraft facility either completely or at least partially. This would be the better solution, especially for the customer who does not use it carefully. The credit has the advantage that the customer can see when he will get rid of his overdraft debt. He pays his installments every month and when the term ends, the loan is paid.
The customer can assume that his credit rating is correct, then there will be a loan despite the overdraft facility. The customer can then convert his overdraft facility into an installment loan. The overdraft facility used is actually no reason to refuse a loan. The customer should know that he does not necessarily have to take out the loan from the bank that provided the overdraft facility.
The customer can look for another bank, whereby the conditions should be observed. At the online banks, the customer receives a loan and nobody asks about the overdrawn account. It also plays no role in terms of the purpose of the loan from one of the direct banks. Nevertheless, a credit comparison should be carried out. If you are looking for a loan, you can immediately incorporate your overdraft facility into the loan.
The overdrawn checking account is not reported to Credit Bureau provided the customer remains within his credit line. But if the credit line is overdrawn, the Credit Bureau receives a message. If the credit is approved despite the overdraft facility, the overdraft facility could be deleted completely. The customer could look for a so-called credit account. Although he does not have the financial scope to do so as with overdraft facility, he also does not fall into debt trap through him.