Overdraft or how to borrow money from bank safely
No matter how carefully a person tries to plan his or her own budget, sometimes there is a situation when the existing money is not enough. Overdraft helps to borrow a small amount of money from a bank. The first overdraft in history was offered to William Hog in Edinburgh in 1728. He was allowed to take out 1,000 pounds sterling more than he had on his account. Nowadays this service is offered at almost any bank. The deputy chairman of the Board of Directors of Avers Bank CJSC Renat Shakirov told how to use an overdraft correctly.
Loan at any time
Let's imagine you have a usual payroll card that you use to receive your salary and other incomes. But you can use only the money you have on the account attached to the card.
Overdraft means you can spend more money that you are having now. The bank doesn't care what this money will be spent on – overdraft doesn't have any designed use. However, there is a limit set by the bank. One can't exceed this limit. You can use an overdraft several times during a month: a free limit reduces when you take out money, and it is restored after you pay off the debt.
Who can get it?
A person who has been working in the latest place of work for at least 6 months and received his or her salary to the card of the bank can use an overdraft.
The sum of an overdraft depends on client's average monthly salary and bank's method of calculation of overdraft's limit. At some banks, its amount can be equal to a half of an average salary or 1/3 of income. For example, Avers Bank sets the size of overdraft equal to an average monthly salary that is delivered to your card.
Every bank requires its own list of necessary documents to get an overdraft. But the set of documents consists of approximately a request to use an overdraft and a document that identifies a person.
How to pay off?
Once money is on your salary card, overdraft is automatically paid off and its limit is renewed, so you can spend the money over and over. Moreover, you don't need to go through a security service constantly and fill in a request for a loan.
Interest charges for the use of an overdraft are arranged between the sides in the agreement beforehand. As for the accrual of interest, only the rest of the real debt of the borrowers' is charged. In case of arrears, the bank can charge fines and penalties.
The limit of an overdraft can change at times. It is one of the peculiarities of overdraft. It depends on the size of average monthly income on the client's account during from 1 to 6 months. The more money the card receives, the more money you can borrow.
Key advantages of overdraft:
- no necessity to open a new credit account
- easy in issuing, a minimum set of documents (sometimes overdraft is granted automatically, for example, within a payroll card programme)
- product allows to liquidise temporary breaks in receipts and a need for it
- client pays interest for the money he or she really used
- no necessaity to borrow money from your acquaintances 'until payday'
But this service also has disadvantages:
— An automatic payoff of the debt when money is deposited (probably client planned to spend the money on other purposes and pay off the overdraft in several days).
If you have an Avers payroll card, visit our offices, and we will arrange an overdraft. If you are a head of a company, we are ready to fulfil a project in your enterprise. And your workers will use an overdraft at favourable interest rates, which will enable to increase employees' loyalty to their employer.