Most people have a checking account through which all financial transactions are processed. With a good credit rating, these current account holders may also use a disposition loan, or short term overdraft facility. In plain language, this means that they can withdraw more than there is credit in the account.
It is a limited loan. It is normal to receive two times a month. Small wishes can be fulfilled quickly and easily. But what if the credit line is insufficient and an additional loan is needed?
Credit with overdraft facility
It is perfectly legitimate to use the overdraft facility in the checking account. However, it is important that this is also carried out within the framework and is not exceeded. Many account holders tend to widen the scope of the overdraft facility. Some banks allow this in silence. However, this behavior can lead to difficulties when applying for a credit with overdraft facilities. The bank clerk, of course, checks the account movements and sees that the overdraft facility has been exhausted or even exceeded. In most cases, he will recommend including the overdraft facility in a loan so that the checking account is balanced again.
What else to consider?
Anyone who uses his overdraft facility has to pay substantial interest. Some banks charge up to 17 percent interest. A loan also costs interest. The legitimate question therefore arises whether a credit with overdraft facility is necessary at all. If there is actually no other possibility, the current account should be balanced in any case.
This is actually easiest if the amount by which the account is overdrawn is actually factored into the loan. Otherwise there is a risk of over-indebtedness, because the bank wants to have the “borrowed” money for the overdraft facility back at some point. In addition, the bank customer saves money for the high interest rates that are due when the account is overdrafted. However, all this only works if the information in the credit checker is also positive. Otherwise there is no need for a bill.