Despite regular salary intake, it can always come back to situations where, for example, you need additional liquidity due to unforeseen expenses. Owners of a checking account can get a disposition credit for this purpose. The extent to which the overdraft facility known as overdraft facility is granted depends on the creditworthiness of the account holder. Another requirement is a regular income. What you have to look out for in connection with a credit report, which pros and cons of overdraft has and which alternatives there are, you will learn in this guide.
How and in what amount can a credit line be requested?
If the conditions are met, a credit line is usually granted already with the opening of a current account. If this has not been done, the credit line will have to be requested later at the bank, which will also keep the current account, which requires additional liquidity . In the first step, the customer informs his bank in which amount he needs a credit line. The amount at which the credit line is granted at the end depends significantly on the monthly cash flow on the current account. As a rule, it amounts to three times the regular monthly cash receipts. For example, if a customer receives a fixed net salary of 2,000 euros, a credit line of up to 6,000 euros would be possible. In the case of a positive credit check , a contract is concluded between the customer and the bank for granting a mostly permanent disbursement credit. If there are any problems with setting up the credit line, this is probably due to your credit rating, which is checked by the banks using a Bank query. For this reason, regularly check the entries that are stored for you at Bank in order to delete or correct obsolete or incorrect entries as quickly as possible.
Unlike other loans, such as a construction loan , no additional collateral is required for the credit line. The bank secures itself however over the lien, as always in the general business conditions to be read. If the customer never settles the credit line, for example because there are no more incoming payments, the bank may access other accounts or securities accounts that the customer maintains with it for the purposes of reconciliation.
Advantages of the Easy Lend Credit
The biggest advantage of the disposition credit is the financial flexibility gained. The loan can be used at any time, but does not necessarily have to be used. If a financial bottleneck comes up unexpectedly in one month, because, for example, an urgent repair to the car is pending, this does not immediately lead to a serious crisis. The granted credit line can be used for this purpose without further consultation with the bank and then be easily compensated by the following incoming payments. According to a survey, almost every fifth bank customer in Germany uses the credit line. The excessive sum is on average € 1,043 per year, media reported last year.
Disadvantages of the Easy Lend
The gained financial flexibility has in the truest sense of the word a high price, because the credit line is charged with very high interest rates, often amounting to 11 percent or more. And even the cheapest deals are according to Stiftung Warentest after all, still at about 8.5 percent. For this reason, the credit line should only be used for a short time and cleared as quickly as possible. The ever-available credit is a significant risk to get into debt. Anyone who has fully exhausted the credit line is often no longer in the black with no help. The monthly salary is then usually only to bring the checking account at short notice to 0. In these cases, consideration should be given to converting the disbursement credit into a significantly lower interest rate installment loan .
In some cases, the bank tolerates that the checking account is also overdrawn beyond the credit line. In this so-called overdraft, for example, pending transfers or standing orders are executed as well as direct debits to a certain amount. The toleration of the banks can have several reasons: Firstly, good customers should not be upset by having problems with his landlord, the telephone company or the leasing company of his car because of a possible one-time financial shortage, because a rate is not paid. On the other hand, the bank earns very well on overdrafts, because the interest rates are on average about 15 percent and up to 20 percent again significantly higher than the interest on the credit line. There is usually no upper limit for the overdraft facility . In what amount the bank tolerates the further overdraft, however, depends on the individual case and must be inquired at the bank. According to studies, however, the overdraft facility is only used by a few clients: only about four percent exceed the bank’s discretionary framework, according to the 2014 FH survey mentioned above.
Some banks have charged processing fees for bookings on a covered account. However, this is not permissible , the Higher Regional Court (OLG) Hamm ruled in September 2009 and declared corresponding clauses in the General Terms and Conditions unlawful. In the specific case, the consumer center NRW had sued against the bank, according to whose terms and conditions customers should pay for the redemption of direct debits and bills and not covered checks per overdraft three euros processing fee. The Higher Regional Court saw no reason for the additional fees, since the lending decision is in the interest of the bank and not in the interest of the customer in the absence of sufficient disposition.
Similarly, the district court of Main ruled in the same year, as it declared the clauses of the bank inadmissible, according to which the customers who have transferred money from a covered current account, should pay each five euros. These charges would disadvantage customers inappropriately. The higher interest rates that are due when the overdraft facility is overdue cover the banks’ risk sufficiently, the reasoning of the ruling confirmed in 2010 by the Frankfurt Higher Regional Court states.
Alternative to the credit line
Anyone who is stuck in the credit line, usually no longer easily back into the black. As a result, current account holders spend hundreds of dollars annually on expensive disputed interest. In this case, offers a rescheduling. The credit line is converted into a much cheaper installment loan. For example, if the current account is down by 3,000 euros, this amount will be balanced out by concluding a second loan. So you are immediately back in the plus and usually pay only half of the interest that is due on a credit line. The second advantage of rescheduling the emergency loan into a installment loan is that the loan amount is conveniently repaid in monthly installments according to a fixed payment plan. Thus, the loan debt steadily decreases until it is finally completely eroded and the borrower is again debt free. In the case of an out-of-pocket credit line, many customers find it difficult to obtain the necessary discipline and to ensure sustainable compensation. Therefore, conversion into a installment loan is the better alternative in two ways. As a result, however, a further slipping into the credit line should be avoided.
Compare outgoing interest
Anyone who regularly uses his disposition credit should put the terms of his bank to the test. With a free and non-binding comparison, the Easy Lend interest of different banks can be compared. Comparisons in the past have shown that between the cheapest and the most expensive interest rate can be over five percent. In this way you can quickly find the bank with the lowest disbursement interest. Especially direct banks often offer more attractive terms than branch banks, as they have significantly lower costs due to the absence of branches and associated personnel. If there are major differences, it may be worthwhile changing the current account, which is generally possible without any problems.