When it comes to increasing the financial scope without directly taking out an installment loan, framework loans are the first choice. They are offered in all forms by all banks. see http://www.covenantpres-sc.org/bad-credit-installment-personal-loans/ for more notes
- The most commonly used credit line is the overdraft facility, which banks grant their customers either automatically or upon request to a certain amount.
- As an alternative or in parallel to the overdraft facility, a demand credit can also be used, which has the advantage that it is not linked to the management of the checking account.
- The third credit line, which is popular with many consumers, is the credit card credit of a revolving credit card, in which the card issuer allows the customer to use the credit card with the installment facility.
For consumers who regularly need more money at short notice than they have in their account, credit lines are an interesting way to be financially flexible and always be able to pay on time.
How is the framework credit defined?
The credit line is a loan that has a fixed financial framework. Within this framework, the borrower is allowed to have money. Framework credit can be applied for as a credit facility with the account-holding bank. On-demand loans are only available from a few providers and revolving credit cards are available from some providers.
In order to be granted a credit line in one form or another, the customer must have an unobjectionable Credit bureau and proof of regular attachable income.
The amount of the framework loan depends on the income situation. When it comes to overdraft facilities, you can expect the banks to grant a credit line that is up to three net monthly incomes. The situation is similar for call credit and for credit card credit, the conditions depend on the card issuer. However, there is often no proof of income to be presented here.
Advantages and disadvantages of credit lines
Framework loans in one form or another make sense if, as a consumer, you are basically able to handle your finances properly. Framework loans require discipline and a sense of responsibility due to the flexible repayment modalities of borrowers. You can be financially flexible and use the money within the credit line or leave it.
Anyone who only uses the credit line for overdraft facilities and on-demand credit in such a way that it can be cleared at short notice does not pay as high interest. However, if the overdraft facility is used on a permanent basis, it is one of the most expensive loans, like the call credit and credit card loans. The average interest rate on overdraft facilities and credit card loans is well over 10 percent. In addition, the interest is not contractually fixed, but can be flexibly adjusted by the banks to market conditions.
Unfortunately, banks tend to forget to pass rate cuts on to consumers, but when interest rates rise, they are quick to charge higher rates when credit lines are used.
As long as credit lines are only approved as such on paper, they do not incur any costs. Costs are only incurred when used and then only for the amount used. With credit card credit, if the balance is settled by the set deadline, there is no interest. Framework loans, however, carry the risk, if they are used carelessly, that one will creep into the debt trap, because one is no longer able to easily balance the balance. If you notice this, you should alternatively take out an installment loan and thus balance the overdraft facility, the on-demand credit or the credit card.
It is recommended to consumers with the appropriate creditworthiness to get at least a framework credit such as the overdraft facility, simply to be financially flexible and to be able to pay unexpected expenses without having to take out an installment loan.
However, a revolving credit card is only recommended to a limited extent. In principle, when it comes to owning a credit card as a means of payment, a normal credit card, where the entire balance has to be balanced when billing, is completely sufficient.