Are you looking for a way to repay your expensive overdraft facility? Or have you already exceeded the credit line granted by the bank and the bank threatens to no longer tolerate this?
The simplest solution is to settle an account by taking out a debt rescheduling loan. But there are alternatives to taking out an installment loan.
Action is always required if you avail yourself of an overdraft over a long period close to the limit. This state signals that it is not possible for you to take care of an account settlement without further measures.
A bankruptcy is advisable before you think about measures to reduce the overdraft. Has the debt trap already snapped at you or are you about to become permanently over-indebted?
If this is the case, you can no longer refurbish yourself on your own. Seek help from debt counseling centers or the local consumer advice center.
In all other cases there is a choice of options to compensate for the overdraft facility. Which is the best solution for you depends on your economic situation.
Debt overdrafts with the financial check credit comparison or Across lender
Financefic will provide you with the cheapest loan solution that over 20 partner banks have to offer.
Sending the credit request obliges you to do nothing. Review the loan offer thoroughly, compare it with other offers that you may have, and then decide.
You will not incur any costs by creating the loan offer.
Across lender probably even works largely with the same banks.
However, Across lender does not process customer credit inquiries automatically, but manually. The individual case check of each credit request enables more intensive customer advice if it is desired.
At Across lender, “problem customers” have a better chance of getting a loan. This refers to customers with a poor credit rating or the self-employed and older borrowers.
Debt balancing tips
Perhaps your bank holding the account has already suggested alternatives to the overdraft facility.
For some time now, banks have been obliged to advise customers if their account is permanently in the red.
In our opinion, accepting the bank’s offers without further examination is not recommended. In any case, first carry out a loan comparison.
The rescheduling of the overdraft facility into an installment loan always leads to lower overall costs because the interest on the installment loan is lower.
However, an installment loan brings with it monthly charges that are not caused solely by interest payments, but also by repayments.
Before you take out a loan, make sure you understand the burdens you can put up with.
To illustrate this, a sample invoice for a credit facility over 5,000 USD. The overdraft interest should be 11%, the interest on the installment loan 4.5%:
The amounts are rounded up and down.
If you leave the overdraft facility for 36 months, you pay interest totaling 1,512 USD without having paid a single cent off the overdraft facility loan.
If you repay the overdraft facility with an interest rate of 11% effectively like an annuity loan (installment loan) within 36 months, you are ultimately debt-free. Your costs are 848 USD.
If you repay the expensive overdraft loan immediately with an installment loan (term: 36 months, effective interest rate 4.5%), the total costs are USD 347.
But the monthly charge against the overdraft facility without repayment is higher (149 USD to 44 USD)
Pay off the overdraft facility like an installment loan, because of the higher effective annual interest rates, the monthly rate for the overdraft facility is of course higher (162 USD to 149 USD).
You can reduce the monthly rates of the debt rescheduling loan by extending the term. However, as the table above shows, this increases the total costs.
Debt restructuring measures are only successful if the monthly installments of the debt rescheduling loan can be raised.
Therefore we recommend accepting higher total costs. It is important that you can easily afford the debt rescheduling loan.
Avoid the temptation to borrow more than absolutely necessary. Banks often try to sell “additional liquidity” to customers when rescheduling, if the bank believes the creditworthiness is sufficient.
Debt credit rescheduling without Credit bureau?
In theory, Credit bureau-free loans can be used to reschedule overdraft facilities.
Loans without Credit bureau are brokered by credit intermediaries like Across lender. They all come from the Agree Bank in Liechtenstein.
The loans are granted at amounts of USD 3,500, USD 5,000 or USD 7,500 and are repaid in 40 equal monthly installments. The effective annual interest rate is currently around 11%.
We have provided details of this type of loan on a separate page.
At an interest rate of around 11%, loans without Credit bureau to balance your account are usually not economically worthwhile at the moment.
The average interest rate for overdraft facilities is currently at the same level.
However, in a few individual cases, rescheduling into loans without Credit bureau in view of further restructuring measures to establish the required credit rating may be worth considering.
Loans from Agree Bank in Liechtenstein are granted entirely without the involvement of German credit bureaus, such as Credit bureau. Previous banks are therefore not easily identified.
This opens the way for further borrowing, which would otherwise be blocked by the overdraft facility.
However, Credit bureau-free loans are only granted to employees and employees in the public service if an average good attachable income can be demonstrated.
Serious creditworthiness problems (bankruptcy, affidavit, arrest warrant) also exclude the granting of loans without Credit bureau.
Framework credit instead of overdraft
Framework loans are a slightly cheaper alternative to overdrafts. On-demand credits basically work the same way overdraft facilities. In fact, the overdraft facility is an application of the credit line.
However, a minimum amount is usually required to be paid back monthly. Of course, this only applies if amounts from the credit line are drawn.
As with the overdraft facility, the interest rates are flexible and are regularly based on a reference interest rate.
The financial product of Fine Bank is an example of a fairly cheap credit line. The bank offers net loan amounts between USD 2,500 and USD 25,000. Interest payments on the amounts used must be made monthly.
Interest rates are relatively cheap. The APR is currently 5.99%.
Before granting a credit, a credit check is carried out, including a Credit bureau information. If you decide to replace your expensive overdraft facility with a credit line, you should make sure that Credit bureau is clean.
Bad score values can lead to loan rejection.
Account settlement with overdraft facility
The repayment is agreed with the account-holding bank. As an account holder, you undertake to reduce the overdraft facility by a certain amount each month.
The amount must be negotiated with the bank. However, many banks accept small amounts.
Be sure to clarify with your bank how to handle the overdraft facility.
Some banks report the overdraft facility return to Credit bureau. This leads to a reduction in creditworthiness and can even cause difficulties in everyday business such as rental contracts.
If the bank is forwarded to Credit bureau, it is not advisable to make such an agreement.
Dissolution of savings and other capital investments
You have credit regardless of which capital investment? The release of such credit for the repayment of the overdraft facility should always be checked.
Hardly any capital investment generates a 10% or 11% return per year.
This does not only apply to simple savings, overnight deposits or time deposits. Even with an equity investment, average returns of this amount are usually not achieved.
Account settlement with own funds is always the most economically sensible solution.
Balance the overdraft facility in time
Balance your account before the bank takes a termination seriously.
Be careful not to use the overdraft facility immediately after closing the account.
This will destroy the selected renovation measure.
It is particularly problematic to overdraw the account despite taking out a debt rescheduling loan. In doing so, you achieve the opposite of debt relief. You are also in debt.
In order to promote spending discipline, it may make sense for the bank to shorten the overdraft facility.
It is less advisable to do without a overdraft facility. It can always happen that the coverage for a certain invoice is insufficient. In such cases, a small pad is helpful to prevent return debits.
If your bank has given notice of overdraft, it can offset all receipts against the outstanding claim from the overdraft facility. This will make your account practically unusable.
The way out is to set up a new account with another bank on a credit basis. Every bank has had to set up such a basic account since mid-2016.
The basic account must not be confused with a garnishment protection account (P account).
The purpose of the P account is to protect the seizure-free amount from access by creditors. The bank can set off amounts that are subject to the garnishment to repay the open overdraft facility.