Overdraft is a way to attract new borrowers

Someone has got used to count exclusively on the forces and to live on means, and someone considers, that it is better to get a desirable thing now, than to save and save. Everyone is right in his own way. If all people chose the first option, then banking institutions would lose a serious income item. Over time, an increasing number of very diverse loans began to appear, one of which is an overdraft. This is a relatively new service that can attract even more customers for using cash.

So, what is an overdraft? In a literal translation, this concept means short-term lending. Any bank service specialist will be able to talk about the advantages of this product, while keeping silent about the shortcomings. The most common salary overdraft. This product is most often provided to a client with an impeccable credit history, which has an account in this institution. That is, an overdraft is the provision of a predetermined amount. In practice, this procedure looks like an overspending of the funds available on the card. This is convenient when an unplanned small sum was required. In other words, an overdraft is the easiest and quickest way to obtain an unearmarked loan.

Conditions, advantages and disadvantages

There are a number of features that make it possible to separate these concepts. First, the overdraft limit is calculated by an expert on a specialized formula that takes into account all possible risks. Usually it does not exceed the amount of wages that is regularly transferred to this card. For a banking institution, this is very convenient, since it can predict the course of events with a certain degree of probability.

The main disadvantage of services is a large percentage, which is charged for the use of funds. In addition, all accrued interest should be repaid immediately, rather than in parts, as proposed in loans. The overdraft term varies from several months to several years.

In addition, the bank periodically monitors the state of the client's solvency, and if there are doubts about his financial well-being, the contract can be terminated. As a result, the borrower will be obligated to immediately give the entire amount. Another difference from the habitual About the loan is that the client can not ask the bank to provide such a service as an overdraft. This decision is taken exclusively by a credit and financial institution. Each overdraft, the terms of which are individual, must be specified in detail in the relevant contract. The bank is obliged to inform the client about the availability of such a service.

The undoubted advantage that an overdraft differs is the absence of the need to collect different documents confirming the borrower's financial soundness. In addition, it should be noted that after the return of the debt, the funds can be returned to use, which can not be said about standard loan products.