Dispo roll over with a cheap loan – That’s how it works
You want to repost your Dispo and pay cheaper interest? Disposition loans are often expensive and despite the flexible way to borrow money, they have significantly more disadvantages than benefits. In our guide you will find out how you can easily repost your disposition credit online and save so much money. See highriverhighlandgames.com for an example
What is a disposition credit?
For many of their customers, the banks are granting a so-called repayment credit. With the credit, which is often simply called Dispo, customers are able to keep their checking account in order. The amount of the overdraft is previously determined by the bank. The amount of the sum granted depends primarily on whether and to what extent regular payments are made to the account in question. In addition, banks also use the help of credit bureaus to obtain information about their customers.
Before the bank grants a credit line, the creditworthiness of the customer and his payment practices in the past are scrutinized. For this purpose, the credit institutions generally use the data that are available at the credit bureau. If negative features are found here, the granting of a dispo credit can be denied. If the bank rejects a bankruptcy due to the bad news, you should, if there are no obvious reasons, such as a non-repaid loan, check the credit bureau entries. Not infrequently they are faulty or outdated.
What conditions have to be fulfilled in order to get a dispatch?
In order to benefit from an emergency loan, usually neither further securities have to be deposited nor a separate loan application must be made. However, a lien is provided in the general terms and conditions of the banks. This allows them to access other accounts of the customer at the same bank, if the collection is not repaid. With the granting of the emergency loan, the customer gets an instrument at hand, with which he can easily cover additional financial needs at short notice and without further effort. This gives him the opportunity to respond flexibly to unexpected financial challenges. Of course, the banks pay well for this instrument, which is both useful and dangerous.
The interest required for the overdraft is many times higher than the interest due, for example, on an installment loan. In addition, the bank can at any time reduce or terminate the dispo. In this case, the account must be cleared immediately. The interest rate can also be changed at any time. Even higher than the interest rates on a discretionary loan are the interest that comes due if the customer, with the bank’s condolence, uses his account beyond the committed credit limit. As credit institutions often have no limit on this overdraft in advance, customers should always have a call with their bank adviser prior to use.
So high are the average interest rates on a discretionary loan
The credit line is one of the most expensive ways to borrow money. At the beginning of 2017, the Financial Testing department of Stiftung Warentest determined the average interest rate for a check-in at German banks and savings banks. At 11 percent, it is significantly higher than other types of credit. For overdrafts beyond the discretionary framework, interest rates of up to 20 percent were even found. Dispo interest rates of more than 10 percent are therefore not uncommon even in times of negative interest rates on large deposits, but the rule. Although some banks are well below this rate, the MRP remains a very costly financing instrument in any case.
Why are disposition loans so expensive?
Why banks demand such high interest rates for credit lines is difficult to convey to customers. Due to the flexible design of this financial product, the interest rates for the Dispo can not be derived from the general interest rate levels in the view of the banks. Even if the customer does not use his credit line, the bank is obliged to keep ready the agreed amount. It therefore has no way to invest these funds elsewhere. In this context, banks also like to point out an increased risk of default and higher administrative costs. Since the MRP interest for all customers must be the same, the banks calculate a medium default risk, which then turns out to be higher than with a customized loan agreement. The flexible character of the MRP is another reason for the high costs.
Since the credit line can not be planned in the long term like an installment loan, it is always necessary to adapt it to the current conditions. This requires an increased use of administrative staff by the institutes. Especially the cooperative banks, which attract attention on a regular basis due to particularly drastic interest rates, give yet another reason for the high costs. They point out that it is not possible for them to borrow the funds needed for the disposals from the ECB. Rather, they use the deposits of their customers, which must of course be hedged.
Despite all these arguments, it is undisputed that the credit line for banks is a very profitable business that they do not want to do without.
What risks do I take as a bank customer with a discretionary credit?
In the case of an uncontrolled use of the emergency loan, there is a considerable risk that you will fall into the debt trap. In many cases, as a consumer, you do not immediately realize that your account has been downsized, so you often discover that your expenses have exceeded your earnings when you look at the bank statement. The regular look at the account is especially important if the numbers found there are not exactly cause for pleasure. The lack of control over revenue and expenditure is the most common reason for financial problems.
You can save so much by converting a credit line into a cheap installment loan
The usual overdraft framework for many banks is three times a monthly salary. So is the regular cash receipt 2,000 euros per month, the Dispo is 6,000 euros. If this is constantly exploited over a longer period to the stop, there are considerable costs. With an interest rate of 11 percent to 6,000 euros, the debtor pays thus annually alone 660 euros in interest.
If this sum was converted into a installment loan, things would look much more positive. At the beginning of 2017, customers with a very good credit rating paid only 2.5 percent interest on some banks for a term of 12 months for the 6,000 euros. That’s just over 80 euros in interest and fees. A saving of 580 euros. If you opt for a longer term to keep monthly rates low, interest rates are even cheaper. With 36 monthly installments, an annual percentage rate of less than 2 percent is sometimes included. Even if a higher interest rate is calculated due to a non-existent top credit rating, this is usually still below 4 percent. In relation to 11 percent at the Dispo a considerable saving.
So you use a credit line without the risk to fall into the debt trap
In order not to lose track and due to the high interest rates, the Dispo should therefore be used only in exceptional cases and for a short time. If the MRP is used over a longer period and can not be compensated by the regular cash receipts, the debt burden grows slowly but steadily. The high interest rates for a credit line also help to pave the way to the debt trap. This risk can only be avoided if the use of the MRP is limited to a few exceptions and short periods of time. Should there be a longer-term need for financing, various alternatives are available.
Which alternatives to a Dispo are there?
Especially with short-term liquidity problems, the credit card offers as a cheap alternative. For most cards, no interest is payable until the monthly billing deadline. This gives consumers the opportunity to benefit from an interest-free loan for a maximum of 30 days. However, if the credit card debt on the key date is not or only partially replaced, so it can also be unpleasantly expensive here. So also applies to credit card: only suitable for short-term financial bottlenecks.
Especially in times when there is little or no interest on deposits, the handle in the savings stocking is a recommended method to compensate for the minus in the account. The possibly existing reserves on passbooks and money market accounts should always be no taboo, if it appears that the MRP can not be compensated in the shortest possible time.
If the credit line loan is utilized regularly and over a longer period of time, the credit line represents an interesting solution. The bank sets up a credit account for its customer on which a previously agreed sum is available for call-off. The borrower has the option here of withdrawing the money in full or in installments over a longer period. In this case, however, interest will only be charged on the currently open amount.
The interest rates for a credit line are generally much cheaper than those for a credit line. Since this alternative is often associated with a minimum term of one year, it is rather out of the question for short-term liquidity problems. Before taking out a framework loan, however, it should always be checked whether an installment loan is not the cheaper alternative.
The way out of the debt trap – alternatives to a discretionary loan
Once you find that you have slipped your current account into negative territory, you should immediately check how long you will need to make up for the overdraft. If you are sure that you will be able to reduce the dispute within a maximum of three months, there is no need for further action. However, one should always keep an eye on the development and as often as possible take a look at the bank statements.
Only the constant control can prevent further slipping into the debt trap. If you have any doubts as to whether you will be back in the black in your checking account within the self-imposed deadline, you should urgently seek the interview with a financial adviser. He will show you realistic and effective ways to reschedule your out-of-pocket credit and how you can improve your financial position.
In many cases, the conversion of the Dispo into a installment loan with fixed installments and a manageable term is the best solution to escape the debt trap.
The installment loan – cheap and secure
In contrast to the credit line, the installment loan offers security and predictability. The loan amount is repaid here in monthly installments. The term is also specified in the loan agreement. Thus, the debtor knows exactly how high the monthly charges are until the final repayment of the loan. However, if unforeseen changes occur in the borrower’s financial position during the previously agreed period, there is still the possibility in many cases of adapting the contract to the new circumstances. An early redemption can be negotiated as well as an extension of the term or a subsequent increase in the loan amount.
However, such changes to a contract once concluded are associated with fees. When concluding a installment loan, it is therefore important to make sure that the monthly burden is also easy to handle. In case of doubt, you should opt for a longer term and a lower rate. In addition to good planning and interest rate security, the installment loan has yet another very decisive advantage over the MRP. He is considerably cheaper. The difference in interest rates on installment loans and overdraft facilities is often seven percent or more.
If you have come to the decision to reschedule your Dispo and replace it with a installment loan, it is advisable to compare the offers of different financial institutions exactly. Between the cheapest and the most expensive providers are often significant price differences. And it does not always have to be the house bank that holds the most attractive offer. The objective financial advice of an independent credit intermediary helps you to find the most advantageous offer for your debt restructuring.
The small loan – the solution with low financing requirements
A so-called microcredit is always an interesting alternative, if the sum required for Dispo rescheduling is relatively low. Up to what amount a loan is considered as a small loan is not uniformly regulated. Totals over 10,000 euros are but hardly a bank under this name. Most small loans are well below this limit. Of the installment loan, the small loan differs primarily through the simplified processing. For application usually only a few documents are needed.
To check the creditworthiness of the bank initially provides a standardized credit bureau query. If no negative features are found here that make it impossible to grant the loan, as a rule only a proof of income or a self-report is missing in order to be granted a small loan. Often, the decision to grant a loan is made on the day the application is submitted. In many cases small loans are used to finance consumer goods. But they can also be used to reschedule the overdrawn account. As with installment credit, the customer benefits from significantly lower interest rates and better predictability through fixed monthly installments and a fixed term.
The personal loan is not only available to friends and relatives
Personal loans are enjoying ever-increasing popularity. The loan does not come from a bank or savings bank, but from private investors. Of course, it is easiest to ask friends or relatives when money is urgently needed. Not always, however, this is a recommended alternative. Because, as everyone knows, friendship ends with money. However, there are other ways to get a personal loan.
In times of low credit interest, more and more savers are looking for attractive investment opportunities. At the same time, there is a growing number of people who no longer trust the big banks or have no chance to get a loan there. On this basis, various platforms have emerged, bringing together investors and people in need of financing. First of all, start-up entrepreneurs have been looking for and finding donors for their ideas. Meanwhile, the business goes far beyond the financing of young companies. Today, car loans are conveyed here as well as loans for other consumer goods. And even those who are looking for a way to repatriate their credit, can be found on these platforms.
The conditions are not very different from those of the banks and savings banks. However, even self-employed and freelancers with irregular incomes have a greater chance of even getting a loan. However, private credit intermediaries also ask for creditworthiness from the credit bureau. Are there any hard negative features such as bankruptcy or a warrant for the delivery of the affidavit, but there is no money here.
In these cases, you should repost your credit line
So there are different ways to replace an expensive credit line. Especially if you have already overdrawn your account for some time and the monthly income is not or only partially sufficient to permanently blacklisted in your account to write, you should urgently seek to reschedule. This will prevent you from slipping deeper into the red due to high interest rates. But even if you can already foresee that you will soon have an increased financial need that exceeds your balance, it is worthwhile to inquire preventively for alternatives to the use of the disposition credit. Although it is tempting to go the simplest way, it can be very expensive in the long term. For more than three months, you should never use a dispo. Then the alternatives are still too attractive.