Credit instead of disposition and overdraft

Dispo on the checking account – Practical, but expensive

Dispo on the checking account - Practical, but expensive

Dispo is a common abbreviation for the Dispositionskredit, also called Dispokredit. Disposition is synonymous with free use or disposition. As a result, the repayment credit is a bank loan whose use and use the account holder can freely decide.

It is roughly comparable to the credit limit as a credit limit up to the amount of credit provided by the lender. What sounds a bit awkward, is the normal for account holders in everyday life. You have a checking account with your bank or savings bank. Your current account can carry you with a credit balance. You do not have to, but you can use the dispo if necessary, that is, overdraw your account and lead with a debit balance in the minus. That costs money, and that is the disbursement interest.

They vary in size from one bank to another, but they are significantly higher than interest rates on installment or credit lines. It is irrelevant whether it is a credit-based or a credit-independent, to a loan with credit bureau, despite credit bureau or without credit bureau. No contractual loan is as expensive as the dispo.

Dispo as an offer without a contract and without credit bureau

Dispo as an offer without a contract and without credit bureau

The Dispo is the unilateral offer of the account-holding institute to be allowed to overdraw the current account by a certain amount. Such an offer gets every account holder with regular payments on his account. It must be permanent income at a level well above the garnishment exemption. Transfer payments from the job center, alimony payments or child allowance are, according to experience, not a basis for a dispo for banks and savings banks. The amount of the dispo depends on the income level.

The Dispo is two, three or even several times the monthly income. For the account holder, it is more than tempting to be able to dispose of an amount in the medium to high four-digit range without first having to conclude a loan agreement. But that is not the actual purpose of a dispo loan. From its source, it should serve to balance monthly scheduling conflicts between revenue and expenditure.

Regular payments for rent, electricity & heating, telephone & internet as well as for the newspaper subscription are due at the beginning of the month. On the other hand, wages and salaries will only be credited over the next two or three weeks. Until then, the account is in minus, or it must be filled with credit. At this point the Dispo intervenes. Without causing anything, all expenses are booked, up to the disposition. The debit balance is then balanced by the monthly income. At best, and so it is intended, the balance at the end of the month is back in plus or zero. A few days later, the same rhythm begins for the new month.

This is not a credit agreement, but an offer. Not in the offer letter, but in the terms and conditions, the general terms and conditions of the bank is noted that the dispo can be terminated at any time by the bank or savings bank. The Account Holder must settle the Dispo within a reasonable period of several weeks if requested to do so. The most frequent reason for this is the visible deterioration of the economic situation. If, for example, irregular commissions are paid instead of the current salary, then this means a financial risk for the bank or savings bank.

This is reduced by the termination of the posting. The account holder is asked for a personal consultation. The goal is to find ways and means to balance the account, as it means to zero. In most cases, the result is the conversion of the Dispo into a installment loan. What seems like a limitation to the account holder at first glance is a significant cost saving. Because the installment loan is significantly cheaper with its fixed debit interest, that is cheaper than the Dispo with variable debit interest rates in the high to double-digit percentage range.

Livelihood – With credit, but without Dispo

Livelihood - With credit, but without Dispo

In principle, every citizen should not spend more than he takes on a monthly basis. “Living with income” is the motto. The repo not returned within one month is equivalent to an additional charge. It increases from month to month by the disbursement interest. Difficult to barely manageable is due to the Dispo due to the fact that monthly more money left in the account than is spent. Debit interest and tolerated overdraft interest are like a screw without end.

The situation is quite different with an installment loan. The monthly installments are fixed. They are included in the monthly budget and thus in the overall output behavior. The lending rates are literally a fraction of the disbursement interest. From a mathematical point of view, the borrower immediately saves money if the former MRP is converted into a loan. Since the dispo has not yet been returned, only marginally or sporadically, but in any case without a fixed plan, the account holder feels the installment loan payments as an additional expense. But against the background, in the foreseeable future without wanting to get along and no credit, that’s not the case. The installment loan is significantly cheaper than the Dispo.

In addition, he is the best, often the only way to debt relief. The bank has two problems to solve in this situation. On the one hand, the loan for replacement must be as high as the MRP. On the other hand, the interest and repayment loan must also be affordable for the account holder. Lending rates and repayment rates are largely fixed. The only margin for the credit institution is the term of the loan. The longer it is, the lower the monthly installments, the more expensive it will be for the borrower.

Credit with, despite or without credit bureau as the only solution

In this situation, the creditworthiness, ie the creditworthiness of the account holder is less decisive. However, if he plans on his own a conversion of the Dispo into a loan, then it is worthwhile for him an extensive credit comparison under the aspects

Credit with credit bureau:
This financing is credit-dependent, the higher the income and the score the better the conditions

Credit despite credit bureau:
Even with a bad credit bureau we still have the opportunity to get a loan. The conditions depend on the creditworthiness, with sufficient income, financing is quite realizable.

Credit without:
It is awarded by a foreign bank and this is a package deal. It is a credit-independent credit (fixed-rate loan) which is awarded only to German citizens.

For each of these forms of lending, the lending rates are significantly lower than at the dispo. The credit despite credit bureau, so with a weak credit bureau score, the experience shows that the interest rate is higher than a loan with credit bureau with a good or very good credit bureau score. The loan without credit bureau is offered by some German and foreign online banks. It will not be entered in the credit bureau database and will be granted up to a mid-sized four-digit amount. The creditworthiness-dependent credit is again based on the creditworthiness of the loan seeker with the effective interest rate. Non-credit standing means that the offered interest rate applies to all who are creditworthy from the point of view of the bank or savings bank. This is also a loan with credit bureau, the credit rating is based on the credit bureau score, and the approved credit is then entered into the credit bureau.

Conclusion: Credit is always better than overdraft

In this situation, the creditworthiness, ie the creditworthiness of the account holder is less decisive. However, if he plans on his own a conversion of the Dispo into a loan, then it is worthwhile for him an extensive credit comparison under the aspects

Quick money
With the dispo it is made easy for the account holder to dispose of money at any time

Overpriced interest
The Dispo is not a gift or a favor of the bank, but a business with high disbursement interest

Rarely used
A low disposition helps the account holder with the monthly revenue / expenditure management in his checking account

Pünktlicherückzahlung
If the account is settled at the end of the month, the disbursement interest is acceptable and acceptable

Cheap alternative
A loan is cheaper and manageable in every way. The conversion of the Dispo into a loan brings now a clear interest savings. With the loan and the associated regular repayment a permanent debt relief is ensured.

No repayment plan
It does not make much sense to deduct the posting of the current account because the high interest on the account does not change

Ideal solution: Do one thing and not let the other.

Dispo always only in case of urgent need

Balance the balance always at the end of the month

Redemption by borrowing with low effective interest rates

Choose the right repayment term | Payday Loan

For most banks, interest rates are maturity-dependent. For this reason, it is important to select the appropriate runtime. A consultation with the house bank can help.

Payday loan: The right term helps

Cheap Credit: The right term helps

Basically, who chooses a loan with a long term pays higher interest. This is primarily due to the higher risk, as a long repayment period can lead to defaults and other problems. Since this is not calculable for the bank, the interest rates are set from the outset higher. Accordingly, the interest rates are low for short maturities, but here too there are risks.

Thus, the individual rates are much higher and the risk of a payment delay increases. This, in turn, leads to additional costs for the borrower. It is therefore important to calculate in advance exactly whether and with what terms a loan makes sense. A household bill can serve as a first orientation.

Budget statement helps with the conclusion of the loan

Budget statement helps with the conclusion of the loan

Before a loan is completed, a household bill should be made. It records and compares all revenues and expenses. Is there enough money left for a loan? If so, it’s time to calculate the running times. Here, borrowers should fully rely on their feelings, while being honest with themselves. If you are unsure, you can test the calculated rates.

This will determine whether the money is sufficient and, in addition, a small down payment has already been made for the loan. Especially with long terms that makes sense, which can be found here thanks to various loan comparisons on the Internet and good deals with long maturities.

Credit comparison: Pay attention to the effective annual interest rate

Credit comparison: Pay attention to the effective annual interest rate

Anyone who wants to take out a loan should resort to a credit comparison. This is the easiest way to determine which institute has the cheapest offer and how the running time interest turns out. Particularly important: a look at the annual percentage rate. This includes a large part of the costs incurred and is therefore a good orientation for future borrowers.

By the way: When taking a loan can also negotiate. Above all, the house bank is often accommodating and goes to appropriate offers. This is especially true if the offers are from competitor institutes. Therefore, it is essential to ask for different offers and submit them to the bank.

The loan has already been taken out, but the term is too long: In such a case, it is possible to make a special repayment and thereby shorten the term. However, this is not always possible, which is why care must be taken when concluding the loan to see which options are available in the contract.

Provisioning interest on construction loans: This is to be considered

Anyone planning a mortgage must, among other things, take account of the provisioning interest. What this is and what borrowers need to look for in this regard is answered in the following text.

Deployment Interest: What is it?

Deployment Interest: What is it?

Provisioning interest is interest that accrues when only part of a loan amount is called up, ie provided by the bank. To compensate for the interest shortfall, the bank calculates interest that accrues to the amount remaining at the bank. Mostly, this does not happen from the beginning, but only after a predetermined period, which can be a year or more. The conditions vary greatly and there are sometimes big differences with regard to the level of provisioning interest.

An example: The borrower accepts a building loan in the amount of 100,000 euros, but accesses only to 30,000 euros. For the remaining 70,000 euros, monthly provisioning costs are now incurred. These usually amount to about 0.25%, which can quickly add up especially with higher loan amounts. In addition, the usual interest for the already withdrawn 30,000 euros must continue to be paid. To keep track of this, the deployment rates should be calculated in advance.

This calculates the commitment rates

This calculates the commitment rates

Provisioning rates are an important factor in any construction loan. Accordingly, it is important to clarify all questions in advance and to calculate the accrued interest directly. Ideally, it will be discussed in advance with the bank and contracted as of when the interest accrues and how high they are. Once that is done, the interest is included in the monthly installment.

If you have no experience here, you can have the provisioning interest charged directly by the provider in the effective interest rate. This makes it easier to calculate than with two different interest amounts. The partial payment surcharges must also be taken into account.

Consider partial payment supplements

Consider partial payment supplements

What also has to be taken into account: any partial payment supplements. These are calculated by the bank once again in addition to the provision interest and the construction interest and accrue at each installment. It is best to choose a bank directly, which waives appropriate surcharges or keeps them at least low. A credit comparison offers itself here, whereby each contract should be presented before the signature to a specialist. The resulting costs are offset by a possible savings and clarity in terms of their own finances, again outweighed. By the way: Most banks let themselves negotiate with regard to the conditions. Who has a cheap offer of the competition has: From the house bank with it. This is particularly useful for larger loan amounts, because even small adjustments in construction and deployment interest can make a big difference.

Pay attention to the correct installment amount of the loan!

The right amount of installment is not that easy to determine when making a loan.

First of all, the bank only allows a certain maximum maturity and therefore only a certain minimum installment amount. In addition, the installment must match your own household budget. Third, the overall burden of interest increases with a longer term. A low installment costs more money.

The rate specifications of the banks

The rate specifications of the banks

Banks and credit intermediaries usually offer terms of between 12 and 84 months, more rarely up to 96 or 120 months.

The chosen term determines the installment amount and the total cost of the loan. With a loan amount of € 10,000 and a nominal annual interest rate of 6.5%, which seems realistic for consumer loans for free use in 2018, the following values ​​result:

  • 36 months term: monthly fee € 306.49, total cost € 1,033.65
  • 48 months maturity: monthly charge of € 237.15, total cost € 1,383.18
  • 60 months term: monthly fee 195.66 €, total costs 1.739,69 €
  • 96 months term: monthly fee € 133.86, total cost € 2,850.78

Of course, lower costs would be desirable because of a shorter duration, but with that, the monthly rate increases significantly. These must be able to afford the budget. Only by calculating the revenue and expenditure can it be determined how much room is left for a credit installment.

Which loan rate does the household budget tolerate?

Which loan rate does the household budget tolerate?

The bank also wants to know what rate the budget can afford.

In addition, it checks in general by a credit bureau query, whether the applicant is creditworthy. The income must also be proven. In apparently difficult cases, even banks require a budget bill.

Even without this requirement, credit applicants should make it for themselves. It helps a budget book, whose guide is complex, but very useful. The budget should list all regular and quarterly or annual revenue and expenditure.

These include salary and income from sideline or rental / leasing, expenses include rent, insurance, purchases, other loan installments, special expenses for purchases, gifts and vacations, telecommunications and mobility costs, and regular and irregular spending on hobbies.

Irregular, quarterly or annual costs and revenues are extrapolated to the year, divided by 12 and allocated to the month. From these calculations results the household budget. Now it has to be ascertained what room for further credit exists.

If, for example, this margin is a maximum of € 200 and the instant loan is to be raised above € 10,000 at a nominal interest rate of 6.5%, the term must be at least 60 months.

Which risks arise from a poorly selected credit rate?

Which risks arise from a poorly selected credit rate?

An unadapted rate carries various risks.

It should not be too low or too high. Both variants can turn out to be counterproductive or dangerous. An unadapted rate carries various risks. It should not be too low or too high. Both variants can turn out to be counterproductive or dangerous.

People often choose a very low rate because the loan should cost as little as possible per month. This is not only more expensive, it also threatens the credit default in the long term (see below).

Even those households who want to repay the loan as quickly as possible and therefore choose a high rate with a short term, thus taking risks. In detail, these can be represented as follows:

Risks of too high rate:

  • Unexpected bills can not be paid because the financial leeway is exhausted by the repayment of the loan installment.
  • The budget can not accept any further financing. There is no room for one more rate.
  • Repeated, though irregular loads such as the repair of the car or a household appliance can not be paid on time. At worst they are stuttered in (expensive) minirates.

Risks of too low a rate:

  • The increased costs caused by the interest over long term burden the household budget.
  • If the borrower loses his job in the next few years during the repayment period, the loan default situation threatens.

Conclusion on the credit rate

Conclusion on the credit rate

A credit rate needs to be well considered. If the borrower has found the bank with the best conditions, he can control the installment amount over the term. Some banks offer a break for difficult cases, but not every lender offers. In addition, the installment break extends the term and thus increases interest rates again. It should only be used in really urgent situations.

Apprentice Credit: Take care

Anyone starting an apprenticeship has to pay for various purchases. To finance car, rent deposit and Co., a special loan for apprentices is the right choice. We explain what to look for.

Credit as an apprentice: possibilities

Credit as an apprentice: possibilities

Basically it is not a problem to take out a loan as an apprentice. Quite the contrary: Trainees are popular customers in most banks, as the income is relatively secure and there is the possibility of a longer-term commitment. For this reason, the terms are relatively cheap and allow the borrower to also take loans with longer maturities and larger sums. The catch: Borrowers in education must meet some requirements.

This includes, for example, the residence in Germany and a minimum age of 18 years. In addition, there must be no negative credit bureau entry and the salary must be received at regular intervals. By the way, credit aid and child allowances do not count as income and are accepted as collateral by very few banks. In contrast to a takeover after training.

Takeover as security

Takeover as security

Those who are safely accepted after the training have a higher chance of getting a loan. In addition, a longer duration is possible because even after the completion of the training there is a regular income. It therefore makes sense to submit to the bank appropriate documents such as certificates or even a letter from the training company. A written approval for the acquisition is ideal here.

Even without commitment, a loan can be taken by finding a co-applicant. This acts as additional security and can help determine the amount of the loan, so it makes sense to entrust the parents with this task. The partner or a friend can also be registered as a co-applicant. The same basic conditions apply as for the main borrower: Regulated income, an existing employment relationship, no negative credit bureau entries. If all this is the case, various offers should be obtained and checked. A comparison is also useful due to hidden costs.

Trainee loan: A comparison is worthwhile

Trainee loan: A comparison is worthwhile

Trainees therefore have quite a few opportunities to take out a loan. Since all credit institutions offer different conditions and benefits, a comparison is recommended. This is particularly useful because some banks offer special loans for trainees. However, these may be linked to a longer-term commitment. Anyone who plans to take out a Riester pension or a building society savings contract can additionally save money here.

If you only need a loan, you should carefully check the conditions. Often, additional services are included, which are not needed at all, but have to be paid by the borrower. Therefore: Study the contract carefully and have it checked by a specialist if necessary.