Revolving loan and overdraft account what is the difference?

 

How quickly can I get a loan from the bank? Protect yourself against all contingencies and before, before life surprises us, try to get financing in the form of a revolving loan or overdraft? Both products allow you to use the bank’s money in an emergency. What is the difference? Or maybe they are the same products under a different name?

What is the difference between a revolving loan and overdraft?

What is the difference between a revolving loan and overdraft?

The revolving loan is granted in the customer’s account at the same bank, after signing the loan agreement and paying the commission, and the debit can be made available even after talking to the adviser by phone. Both products allow you to quickly get money from the bank, for any purpose

Overdraft and a revolving loan

Overdraft and a revolving loan

Contrary to popular belief, account overdraft and revolving credit are two separate credit products that banks make available to their clients after verification of creditworthiness and creditworthiness. Although these products can perform the same functions – they are a financial cushion for any eventuality, for any purpose, but there are fundamental differences between them.

Identity feature for both products is that revolving credit and overdraft automatically pay off each time you pay into the account of the customer – the borrower.

Distinction between overdraft and revolving credit

Distinction between overdraft and revolving credit

When applying for a revolving loan, the customer must sign a loan agreement with the bank, although the formalities are simplified here, at least in comparison with applying for a cash loan or a car or mortgage loan. Most often, you will have to pay a bank commission for a revolving loan, while overdrafts are usually granted free of charge and without another contract being signed.

You can apply for a debit at the bank where the customer has a settlement and savings account. The process of obtaining a debit requires a minimum of formalities – usually just call or click the appropriate option in electronic banking.
A revolving loan is a credit line and allows for more debt than overdraft – this allows you to borrow only a small amount from the bank – several hundred or several thousand dollarss. The credit line may amount to several times higher. The overdraft period is shorter and is generally 30 days, while a revolving loan can be repaid for up to a year, with the option of extending the repayment period for next 12 months.

When should you use overdraft and when from a revolving loan?

When should you use overdraft and when from a revolving loan?

If we need a relatively small loan and we are able to pay it back quickly, overdraft will be a good solution. We will obtain it quickly, provided our credit history or cooperation with a given bank is positive. On the other hand, a revolving loan in your account will be a suitable offer for customers of banks who need more cash and want to pay off their current income in for at least a few months

How do you calculate the total cost of a loan?

Comparing loan offers with respect to their interest rate is not appropriate. The borrower incurs many other costs that are charged to his pocket as part of the monthly principal and interest installments and the fees immediately incurred when signing the loan agreement. So let’s find out how to calculate the total cost of a loan?

 

When calculating the total cost of a bank loan , all fees and commissions borne by the borrower should be included. This can be calculated based on the amount of the liability and the APRC of the loan. 

 

What is meant by the total cost of credit?

What is meant by the total cost of credit?

 

The total cost of the loan includes all costs that the borrower will have to bear in connection with the signing of the loan agreement. It is not only interest or commission charged by the bank for granting the commitment. In addition to interest and commissions, the total cost of credit should be added to the pool:

  • taxes,
  • margins,
  • costs of establishing loan repayment collateral,
  • insurance premiums,
  • additional costs.

It happens that some additional costs the customer bears only when he decides to take additional insurance or establish collateral. Some of them involve only certain types of loans , e.g. mortgage fees related to the entry of a mortgage in the land and mortgage register for the bank. Credit costs should therefore be divided into voluntary and mandatory costs, which will be necessary if the person wants to get a loan .

 

How to calculate the total cost of credit?

How to calculate the total cost of credit?

 

To calculate the total cost of the loan, it should include credit interest, calculated on the basis of the interest rate provided by the bank, the loan commission, the fee for examining the loan application and any other fees indicated by the bank in the loan agreement and in the table of fees and commissions. A facilitation for the client will be obligatory to put in the loan offers Annual Real Interest Rate of the loan, i.e. APRC. This is actually the total cost of the loan that the customer must bear, but expressed as a percentage of the total loan amount per year.

 

Information on the total cost of credit should be the starting point when comparing different offers. On this basis, you can clearly choose the offer with the lowest costs charged to the borrower. Interestingly, it will not necessarily mean a loan with the lowest nominal interest rate.

Does the pensioner have a chance for a loan?

 

 

A pensioner has a chance to get a bank loan thanks to stable, stable income and the opinion of a reliable borrower, which this social group enjoys.

Credit conditions for retirees

Credit conditions for retirees

 

Many banks are willing to grant a loan to a pensioner. However, he must meet certain requirements regarding:

  • act,
  • the amount of income received,
  • credit history.

If the borrower in such a situation is additionally burdened with the need to repay another liability or is the guarantor of the loan, this is a serious obstacle to the granting of another liability. The age of the pensioner is also important for banks. Persons with approximately 70 years of age can get a loan in most banks in the country, but it will be a rather short-term commitment, granted for a maximum of 8 years, although it depends on the individual situation of the pensioner and on the policy pursued by the bank.

The loan will also not be granted for a high amount, because in the majority of cases the income of the pensioner will not be too substantial. The history of crediting with credit checker also matters.If the potential borrower has negative entries in the Credit Information Bureau, he will certainly not get a loan from the bank.

Special loan for a pensioner

Special loan for a pensioner

 

Few banks are willing to offer pensioners a special cash loan. Banks clearly appreciate the fact that pensioners usually fulfill their repayment obligations very reliably. When granting a loan, sometimes simplified rules can be obtained in the loan process. To determine the amount of income, the bank only needs a payslip of the retirement benefit, the decision of the retirement body to grant it, or a certificate issued, or another authorized body that pays retirement.

The advantage of pensioners applying for a loan is that they can present a stable source of income that they will not lose. They are reliable borrowers who properly guarantee timely repayment of installments.

Aretired person can get a home loan but only from the bank in which he/she has a pension account. What is the tenure of a home loan for pensioners ? The tenure of a home loan will be up to 15 years or 70 years of age, whichever is earlier.