Increase the overdraft facility or cheaper loan alternative?

Almost every bank customer has a credit facility, which he uses occasionally. The credit limit granted in the checking account serves primarily to bridge financial bottlenecks. But for many customers, the overdraft facility is no longer just for this purpose. Due to rising living costs, many customers rely on the overdraft facility each month. Most of the time, the drawdown on the credit line increases successively to such an extent that the limit on the overdraft facility is quickly reached. For this reason, the borrowers then speak to their advisors and ask for the granted limit to be increased. But exactly this request only leads further into the debt. The credit institutions earn a lot of money from the overdraft facility, since the customers have to pay high interest rates for it.

Pay off debts by fixed installments

Pay off debts by fixed installments

If a customer now asks for an increase in the overdraft facility, the banks usually consent with a beam of joy, as this will give them even more money. However, the customer pays a very high amount for the interest alone in the quarterly account settlement, so that he slips further into the target. A better alternative is to reschedule the current draw into a short-term loan. This alternative has several advantages. The most important advantage is the saving of the unpaid interest for the overdraft facility. After rescheduling, the checking account is balanced again and you only pay the fixed interest for the new loan. Depending on the loan, this saving can amount to up to 8%. Furthermore, as a customer you now have a calculation basis because you pay previously fixed installments so that you can pay off the debts.

With the overdraft facility, there is usually no consequence of repaying it monthly. In the course of a debt rescheduling, the loan amount can also be selected so that you also have additional money available for upcoming purchases. In addition, the entire credit line is now available again, so that you can use it occasionally as a customer. So you can freely dispose of your money again. However, customers should not make the mistake of making a new claim. In many cases, the debt is rescheduled, so that very high loan amounts quickly arise. Rescheduling a current account is always worthwhile. The sum of the interest saved is very often underestimated.

Choose the best way of rescheduling

Choose the best way of rescheduling

If you are faced with the choice of rescheduling your checking account, you should always choose this option. Because what many do not know is that the interest rate on the overdraft facility is variable and can always be adjusted to the changes in the money and capital markets. In addition, the bank can terminate a credit facility after a reasonable period of time, so that the entire amount is due immediately. With a loan that has been taken out, this can only happen if the installments are not paid. For these numerous reasons, therefore, a cheaper loan alternative should always be used when the overdraft facility is fully used. Almost every alternative is cheaper than increasing the overdraft facility.

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