A credit facility is the one that Agree bank customers come into contact with first. As a rule, an overdraft facility is automatically set up when a checking account is opened; if this does not happen, it is usually approved retrospectively, ie after the first payments are received on the checking account.
If you would like to extend the scope of the overdraft facility, an informal application is usually sufficient, which, if the usual conditions for a loan, i.e. of legal age, are met, regular payments to the bank account, a place of residence in Germany and no positive Credit bureau entry, is approved quickly and easily. Accordingly, the overdraft facility is by far the most popular form of credit among consumers.
Factors for determining the limit of availability
The availability limit of a credit facility usually depends on various factors, but largely on the average monthly income of the current account holder. In general, a disposition of two to three months’ salary is applied, whereby long-standing bank customers with exemplary payment behavior from their house bank can expect goodwill if they need more money in the short term.
Especially for freelancers and the self-employed – who normally have to struggle with fundamentally restrictive lending practices on the part of the banks – a credit facility offers the opportunity to receive money at short notice. However, this group of people has to reckon with a much lower budget than employees or civil servants, for example.
Advantages and disadvantages of overdraft facilities
For many current account holders, factors such as easy access to the same as well as the possibility of an increase in the credit line without major formalities are decisive for the decision on a credit facility. In addition, there is no strong payment pressure associated with a credit facility. At least if the credit limit is not exceeded, the loan can remain open regardless of the term and without monthly repayments.
However, such flexibility also comes at a price, because an overdraft facility is ultimately not cheap at any bank; The market interest rates on average in Germany are around twelve percent. And it becomes really expensive when the pre-agreed credit limit for the overdraft facility is exceeded. Most credit institutions tolerate the exceeding of the credit line to a certain extent, but they charge extremely high overdraft interest rates. Furthermore, the current account holder can expect a negative credit rating if his credit line is overdrawn.
Installment and framework loans as cheap alternatives to the overdraft facility
If it is only a short-term financing and the loan amount can be repaid in a very short time, an overdraft facility makes sense. However, if it is clear from the start that the need for long-term finance is involved, the decision to use a different loan option is advisable even with low loan amounts. Commercial installment loans with monthly repayment installments are available from as little as USD 1,500 and are, without exception, better terms than those of an overdraft facility. Such installment loans are also excellent for the possible rescheduling of a previously more expensive overdraft facility. It makes particular sense for this to probe the current offers from direct banks, since their lending rates depend solely on the term of the loan and not on the creditworthiness of the borrower himself.
Another good alternative to expensive overdraft facilities and traditional installment loans are so-called framework loans. As with all other loan options, the bank sets a credit line here, which the bank customer can claim at any time and without further formalities. This type of loan is particularly attractive because the borrower can easily increase the minimum monthly installments and can therefore usually repay the loan without further fees.