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

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