What is overdraft in simple words? Essence, conditions, connection

Large banking institutions regularly offer potential borrowers more and more different loan products. They differ in terms of provision and use. An overdraft is considered a rather interesting way of obtaining credit funds. It is presented in several varieties. Overdraft is a loan provided when an account overruns. It is issued for a short period of time, therefore it is repaid immediately upon receipt of money in the account. Low interest is accrued on it, and its limit depends on the movement of money in the account.

Overdraft concept

Such an offer has appeared in Russian banks relatively recently. Overdraft is a loan that is issued for individuals, as well as for individuals and companies. Its unique features include:

• It can be connected to credit cards or deposit cards;
• due to this function, a citizen can spend a little more money than he has on his account;
• such an overrun is represented by a short-term loan;
• the debt is repaid immediately upon receipt of funds in the account;
• the option is activated only after prolonged use of the services of a particular bank, since on the basis of cooperation data an optimal overdraft limit is formed.

This option is available exclusively to responsible and solvent customers. Having understood what a card overdraft is, many people connect it to their payment instrument, which allows them to use the advantageous bank service.

Overdraft example

Not all people understand what this option is. Overdraft - what are these simple words? It is advisable to consider it in a separate example:

• the owner of the salary card receives 40 thousand rubles per month on the account. on time;
• the bank offers him to connect an overdraft on favorable terms;
• the credit limit is set within 5 thousand rubles .;
• at a certain point in time, a citizen needs to make a major purchase, which requires spending 43 thousand rubles, but only 40 thousand rubles are on the account .;
• he makes a payment, as a result of which he uses credit funds in the amount of 3 thousand rubles .;
• after the salary is transferred to the account, the loan is automatically repaid, and a commission of 200 rubles is charged;
• as a result, the account remains: 40,000 - 3200 = 36,800 rubles.

Thus, the essence of the overdraft is to enable bona fide borrowers to slightly exceed the existing limit on the card.

How is overdraft different from a loan?

Overdraft is a certain type of loan, but it differs from the standard loan in some ways.

Overdraft is a unique offer of the bank, which is available exclusively to reliable, trusted and solvent customers with a stable salary.

Overdraft Varieties

This banking option is presented in several forms, drawn up depending on the desires and capabilities of the customers themselves. Varieties are distinguished:

• standard;
• salary;
• for collection;
• technical;
• advance.

Each option has its own design conditions, application rules and nuances.

Standard

It is considered a classic type of overdraft. It is provided to the client of the banking institution on the basis of the limit calculated at the signing of the agreement. The main purpose is the execution of various payment orders or payment of numerous expenses.

Banks provide such an overdraft if the conditions are met:

• work experience in one company should exceed 1 year;
• a citizen must be a regular customer of the selected bank, so he must use an open current account for six months;
• per month must be at least 12 cash receipts to the account;
• open loans or misconduct by the client of the institution are not allowed.

To calculate the limit, the minimum account turnover is taken into account. Such overdraft conditions are suitable only for people who regularly receive funds to the account, and also work with significant cash flows. Typically, clients are represented by entrepreneurs or owners of medium and large businesses. The standard rate is set at 14.5%.

Salary

Such an offer is considered the most common in various banking institutions. It is intended for citizens who receive a salary in an account opened with a bank.

A salary overdraft is an interesting offer for every person who sometimes needs to exceed the cash limit on the card. When registering such a banking product, the nuances are taken into account:

• the limit is set based on data from bank employees regarding the size of the client's salary;
• when using an overrun, you can spend money on any needs, and you do not need to report to the bank for this;
• the interest rate is accrued exclusively on the money actually spent, as well as on those days when the loan was used;
• cons include a low credit limit, which does not exceed 2 salaries of a citizen;
• a refund is required within three months.

It is possible to connect a debit overdraft for a card subject to the following conditions:

• a citizen must be a regular customer of the bank, so his salary for at least 6 months should be transferred to the account of a banking institution;
• the employer must transfer funds to the card without delay;
• the size of the limit depends on cash receipts;
• the interest rate will be much higher than with a standard consumer loan.

Each holder of a salary card should be independently interested in the possibility of connecting such an option to their payment instrument. The standard salary overdraft is set at a rate ranging from 15 to 20%.

For collection

This type of loan is intended only for business representatives. They should use the proceeds at 75% of the turnover from the loan. Such revenue may be deposited into the account for crediting. To use an overdraft, it is required to draw up an appropriate contract, and it is usually formed for one year. If necessary, it is easily extended.

The tranche is provided for a maximum of 30 days. Collection overdraft conditions are as follows:

• minimum business representative must be engaged in the selected activity for one year;
• the client must have regular and high receipts in different settlement accounts of one bank;
• a guarantee is required from another business owner;
• at least two regular customers must be confirmed.

The limit on such a loan depends on the available turnover of the citizen, as well as on the number of debtors, the frequency of crediting of funds and the direction of his work. The maximum Russian banks offer on such conditions 50 million rubles. The rate is 14.5% per year, and 1% is paid for opening the limit.

Technical

It is considered the easiest to design. Banks offer such an overdraft without analyzing the financial condition of the borrower. For this, only cash receipts for three days are taken into account to a citizen's account opened with a bank. It is provided for a limited amount of time, after which it is closed.

To connect this type of overdraft, you must take into account the conditions:

• if there are accounts opened with other banks, then you need to take appropriate certificates from these institutions in advance, confirming the receipt of funds;
• confirmations of all turns for half a year are prepared;
• documents are needed indicating that the citizen has no debts on other loans.

To fill out this option, you need to make a special application, which describes the operation being carried out, on the basis of which funds will be credited to the settlement account. It is recommended to attach to it different payment orders, contracts or other documents. The rate is usually set at 15%.

Advance

This loan is provided only to some bank customers. They must be verified, have long been collaborating with the institution and have significant income. Such a credit overdraft is offered only by the banks themselves, so rarely applications from customers receive approval.

Its main features include:

• the borrower must be officially employed for at least one year;
• if an IP loan is provided, then it must be successful for more than a year;
• the number of receipts per month should exceed 12 times;
• during the year it is required to use various bank services, which include cash management services;
• the account does not allow the presence of zero revolutions;
• There should not be any outstanding claims or instructions.

When determining the limit, the minimum turnover for the last month is taken into account, and various credit transfers are previously deducted from it. The interest rate is usually 15.5%.

Clearance process

Many people who are regular customers of banks realize the value and profitability of using an overdraft, therefore they often submit applications for its connection. How to connect overdraft? The registration process is divided into successive stages:

• Initially, one must have a valid current account, which a citizen should regularly use for at least 6 months;
• an application for connecting the option is formed, and it is allowed to indicate the desired size of the limit in it;
• additional documentation is attached to the application, which includes a passport, a certificate from the Federal Tax Service on the absence of tax debts and certificates, certificates from other banks in which accounts are opened that indicate the movement of funds through them, documentation for various property belonging to a citizen;
• if you transfer a certificate of ownership of the apartment or house, this can have a positive effect on the size of the limit and the interest rate, as the bank will be sure that if the borrower is unable to return the funds, they can be returned forcibly, since the borrower is financially secure ;
• a certificate of income must be transmitted;
• Based on the received documentation, the bank employees determine the feasibility of connecting the option;
• if the answer is yes, then the applicant shall be notified;
• calculation of the optimal size of the limit;
• a contract is being drawn up that is being studied by a potential borrower;
• if he does not have any claims, then he signs this agreement.

Particular attention is paid to the study of overdraft agreements. You should make sure that there are no hidden fees and other conditions that were not agreed in advance.

At Tinkoff Bank, overdraft conditions are considered acceptable to each recipient. It can only be issued by cardholders of this bank. If you spend no more than 3 thousand rubles. of the proposed limit, it is not required to pay any commission. If more than 3 thousand rubles are spent, then a commission is charged daily.

The nuances of connecting overdraft companies

This opportunity is offered not only to individuals, but also to companies. Each bank has its own requirements for recipients. To enable such a service, companies must prepare certain documentation. It includes:

• securities from banks with open current accounts;
• constituent documentation of the organization;
• statement of cash flow accounts;
• certificate from the Federal Tax Service about the absence of tax debts;
• financial statements confirming the profit of the organization.

An overdraft is provided only to companies that have already been cooperating with the bank for at least six months. At the same time, it is important that the results of the enterprise are positive. Credit history must be perfect. With long-term cooperation, all companies can count on an advance overdraft.

Pros and cons

Overdraft connection has both advantages and significant disadvantages. Positive characteristics include:

• a citizen or company always has the opportunity to spend more funds than is available on the account;
• the limit is automatically updated, therefore, it is not required to issue it every time anew;
• no need to report on spending to the bank;
• You can not only use the funds for cashless payments, but it is also allowed to withdraw cash.

The disadvantages are the following parameters:

• interest is considered significant, and they are much higher than the rate set for a standard consumer loan;
• there are restrictions on the size of the limit, and usually a really small amount is issued;
• most banks offer this option for a fee, so a commission is charged annually;
• account opening fee required;
• if the loan is increased at the request of the client, then this process is usually paid.

Due to the many features, you should responsibly approach the connection of this service. It is advisable to study several offers from different banks in order to find the perfect option for a particular borrower.

Can a bank refuse to connect an overdraft?

Overdraft is intended exclusively for regular, solvent and responsible borrowers, therefore often citizens who want to connect it to their card are faced with a refusal by the bank. It can be due to various reasons:

• a citizen uses the services of a bank for less than six months;
• he does not have a stable and constant income;
• there are too small revolutions of funds in the account;
• work experience is less than one year.

Therefore, before applying, it is strongly recommended that you study all the requirements for potential borrowers in advance.

Thus, overdraft is considered a rather interesting banking offer. It is presented in several varieties. It is offered only to reliable customers with whom the bank has been cooperating for quite some time. Often applications for connecting this option are rejected for various reasons. Before designing such a service, one should evaluate not only its advantages, but also significant disadvantages.