Credit despite overdraft facility – debt trap?

Overdraft is the most lucrative business for banks. Customers who use the overdraft facility pay an average of 10-18% in interest. Who thinks of usury here is not wrong. The overdraft facility is a loan that banks make available to their solvent customers without much paperwork. The overdraft facility – namely, overdraft facility – or overdraft facility is additional liquidity for the customer if he is in a financial constraint.

However, the overdraft facility is only intended for short-term use because of the high interest burden. The overdraft facility of the overdraft facility is based on the income paid to the account on a monthly basis. The amount of the overdraft facility can be two to three net monthly salaries. The customer can use his overdraft facility until he gets beyond the credit line. Then it’s time to apply for a loan despite overdraft.

The overdraft facility – the debt trap?

The overdraft facility - the debt trap?

Basically, many customers think that overdrafting is a good thing. If an unexpected purchase or an urgent invoice comes during a month and has to be paid immediately but the account is empty, then the overdraft facility can be used. One might think that it makes sense if the coating is balanced again when the salary is received.

But as it is, there is an additional payment from the ancillary costs in the month, the youngsters need new shoes, in short, there is no money left, the overdraft facility remains as high as it was. The customer should know in such a situation that a constantly used overdraft facility and overdrafts can affect the customer’s creditworthiness. If the bank then no longer transfers and there are return debits, this is entered in the Credit bureau. The negative entry stands with its unpleasant consequences.

Return debits as the account is not covered, the customer should be warned. Either he tries to get out of the dilemma with his own strength or he chooses a loan despite overdraft. The simple disposition has already driven not so few customers into the debt trap. An always used overdraft facility with overdrafts on the granted credit line costs the customer a lot of money.

Because if the interest rates for the overdraft facility are not very high, the overdrafting of the credit line costs again. The bank again calculates interest of around 5%. If the overdraft facility is charged with up to 18% interest and another 5% is added, the overdraft facility has an interest volume of no less than 23%. Nobody would take out a normal loan with such a high interest burden.

But the customer who fell into the dispo trap has no choice but to either tolerate that or to get out of the dispo trap with a loan despite the overdraft facility.

A loan despite overdraft?

A loan despite overdraft?

There are also banks that cancel a overdraft facility and demand the credit back from the customer in one fell swoop. This bank will not offer the customer a loan. He can then go to another bank and try to get a loan there. But this should be a bank that does not request bank statements when applying for a loan. Because the debit is written on the account statements, which often makes a loan impossible, despite overdraft.

There is still good news, the Credit bureau only receives news that a disposition has been granted. The Credit bureau does not find out how often it is used. However, the customer must have met his payment obligations. If the overdraft facility is used “normally”, ie in such a way that due transfers can be carried out at any time, this will not affect the customer’s creditworthiness. Banks will only become skeptical if they continuously exceed the credit limit granted and can refuse a loan despite overdraft.

If the customer finds a bank that approves a loan, the customer is advised to include the overdraft facility in the loan. This process can be described as debt restructuring, since the overdraft facility is converted into an installment loan. If the customer plans this loan in advance and adjusts the installment amount to his income, he can come out of the dispo trap. However, it is then advised to reduce the disposition or to have it completely removed.

If the credit can be approved despite the overdraft facility, and should the customer leave his overdraft facility in mind, should he think about it, if the overdraft facility is used, then it should be settled again within three or four months. As soon as the incoming salary no longer covers the overdraft facility, the debt trap begins. The bank calculates its interest every three months, every quarter. They come to the overdrafted disposition and that can add up. With the loan, despite the overdraft facility, the customer should not buy anything new, but fix the overdraft facility.

The conditions

The conditions

The advantage of a loan despite overdraft is that the customer can pay off the installment loan in monthly acceptable installments. So he gets fixed rates with which he can plan. To get a loan, the customer needs to know that he needs a sufficiently high and regular incoming income. The Credit bureau must not have any negative entries either. The bank checked this in advance, otherwise it would not have provided the overdraft facility.

Dispo has certain advantages, it makes you financially independent in a way. You see something cheap and would like to buy it, but the actual salary is already planned, but the overdraft facility is still available. So the customer can gradually slip into the red. The customer should know that he actually has good prospects for a loan despite overdraft. However, if the bank had to pay back installments or loan liabilities due to insufficient funds in the account, the loan may be rejected.

Then it can happen to the customer, even though he has a clean Credit bureau and his income is right, that the bank still refuses the loan. The bank is too high the risk of a loan default.

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