Overdraft facility is a simple and convenient way to finance short-term purchases, to fulfill spontaneous wishes or to pay unforeseen bills. However, considerable amounts of overdrafts can quickly come together if the overview is lost due to the large number of bookings in the checking account.
If you permanently overdraw your account, a loan can make sense to compensate for the overdraft facility. Because overdrafts are expensive and if the limit is reached, there is even more interest for tolerated overdrafts or the bank no longer permits overdrafts.
Compensation through an installment loan
A suitable loan to compensate for the overdraft facility is the installment loan. This is usually a loan with a fixed term and fixed interest, which is repaid in monthly installments. As with the overdraft facility, an installment loan is usually granted without property security; proof of regular salary payments or payments is sufficient.
Banks offer installment loans on different terms, but as a rule the interest here is significantly cheaper than with overdraft facilities. Usually, the customer can choose the loan amount and the term within certain limits. For a given loan amount, the choice of term has an impact on the monthly payment. The longer the selected term, the lower the monthly rate and vice versa.
Get an overview again
The choice of term or rate should be based on the personal financial scope. These can be determined on the basis of a household bill, in which the monthly income is compared with the expenditure. The excess of income over expenditure represents the maximum amount that is available for monthly installments. A household bill also makes sense to get an overview of your own financial situation.
Many lenders also require them as part of their credit check. Because of the more favorable credit conditions, the installment loan offers real interest savings compared to the overdraft facility. The monthly installments ensure a continuous repayment of the loan, which gradually increases your personal scope.
Credit to compensate for the overdraft facility: on-demand loan
Another option for a loan to offset the overdraft facility is an on-demand loan. This is a credit line that is provided on a separate credit account. The call credit can be used as flexibly as with an overdraft facility. As with the installment loan, however, monthly minimum repayments are provided depending on the utilization. The terms are similar in amount to the installment loan, but the interest rate is variable.