An overdrafted checking account must not be a permanent condition. Overdraft facility is convenient, but extremely expensive, everyone agrees.
But how to balance the overdraft facility? How do you balance overdraft credit with credit or would you rather save it until the overdraft wears off on its own? Our adviser explains what you should pay attention to in your overdraft facility, which debt restructuring option is available, depending on your personal credit rating.
How do you balance overdraft credit with credit or would you rather save?
Balancing overdrafts with credit is the most effective way to save interest. Nevertheless, experience shows that citizens with excessive salary accounts wait far too long before deciding to take this step. The iron will to save will do it in a world full of temptations. Unfortunately, very few consult a calculator before they decide to save.
Savings are made by foregoing consumption. Not an easy task in a world of card payments and many interesting special offers. Saying “no” to special offers could perhaps be implemented by every consumer. But keeping an eye on the account balance is much more difficult. Already with the card payments at the self-service checkout in the supermarket, the overview is quickly lost. If you also pay with a credit card or if the current account is used by two authorized parties, the overview is a matter of luck.
It is only after a year or more of continuous savings that current account holders find that the account balance has improved little or not. The overdraft interest is a decisive factor in this fact. They are extremely high compared to the installment loan. Only a few know exactly how much money the house bank charges. The decision to balance the overdraft facility with a loan is therefore only made when the exact figures show the savings volume on the calculator.
Compensate overdraft facility – this is how expensive the overdraft facility is
Germany divides the current account into two groups. A faction never uses its overdraft facility. Statistics have met the prejudice that these people were very wealthy. Citizens with good income tend to overdraw their accounts. If you really have to calculate, you simply cannot afford expensive overdraft rates. The second fraction is in the red at your house bank with around 3,000 USD.
Credit for overdraft facility Interest example:
German organization published in 2015 that up to 17.5 percent overdraft interest is charged for overdrafting. The number is still a guideline for overdraft interest for 2016. Best Bank Blomberg, for example, calculates 16.88 percent effective interest for the overdraft checking account. (As of March 31, 2016). Based on the Best Bank’s current overdraft facility, overdrafting of 3,000 USD costs 506.40 USD a year or about 42.20 USD per month.
In the best-case scenario, balancing the overdraft facility with credit would be possible at an effective annual interest rate of 1.99 percent. (Duration 36 months with a monthly installment payment of 85.89 USD). Compound interest calculation and repayment are ignored for the debt rescheduling loan of USD 59.70 interest per year or USD 4.97 per month. If interest and repayment were included, the installment loan costs a total of 92.08 USD interest for the entire term. Based on the year, it would be 30.69 USD or 2.56 USD per month.
In this example, clearing overdrafts with credit pays off month after month with interest savings of around 40 USD. For a total saving of 480 USD a year, you can take advantage of some special offers. Without getting even a cent in the red. The example shows that an installment loan for debt restructuring is an elegant savings model without suffering.
Reasonably debt to the overdraft facility – good and normal creditworthiness
Debt rescheduling on an installment loan can be recommended from a loan requirement of around USD 1,000. A good credit comparison shows which installment loan would be particularly low-interest for your own debt rescheduling requests.
Usual credit comparison calculators list possible installment loans for overdraft rescheduling according to interest rates. Initially, only the required loan amount, the term and the purpose are to be entered. The credit comparison does everything else automatically.
The advantage of early action is the small loan for overdraft rescheduling. In the simplified credit check procedure, with a sufficiently good credit rating, a quick approval and very low interest rates can be expected.
Balancing overdraft facility with credit – difficult creditworthiness
To terminate the “friendship” to the overdraft facility is not only worthwhile if you have a good or normal credit rating. If the creditworthiness is personally difficult, the interest claims of the house banks even increase in comparison to the overdraft in the specified discount range. The approved overdraft above the overdraft facility at banks in Germany can cost well over 20 percent interest.
Balancing overdrafts with credit is also possible with a somewhat restricted credit rating using the credit comparison. However, the focus on the overdraft facility in the case of difficult creditworthiness is no longer directed towards regular bank loans. All regular credit institutions take great care to avoid any credit risk. The reputable alternative is provided by portals for loan brokering from private to private.
Good Finance and Best Lender have shared market leadership in serious private lending for years. The attempt to credit is generally free of charge on the portals. Moderate agency fees only apply if a loan agreement is concluded. But it’s worth it. Balancing the overdraft facility with credit with private money is, despite fees, usually cheaper than pushing the expensive overdraft in front of you.