A huge number of people use overdraft, even if not all of them know that it is called that. In fact, the overdraft limit is the amount of funds determined, among other things, for regular receipts to the client’s account. For example - payroll, transfer other earned funds from account to account, receive regular payments of a different plan and other options for receiving money. It should be remembered that some banks require documents to confirm the fact of the legality of receiving funds from a potential borrower for an overdraft. If this point needs to be avoided, it is necessary to ask in advance whether such a requirement exists and proceed from the information already received: register it here or change the bank.
Overdraft
This is a certain type of short-term lending, which implies continued servicing by the bank of the client’s account even when the required amount of funds exceeds the existing balance. This is done only when the overdraft limit has been previously set on the card account. It should be remembered that the bank can never, on its own, that is, without the knowledge and permission of the client, connect this type of loan to the card, unless this is stipulated by the terms of the card agreement or indicated in any other document signed by the bank. Also, the amount of overdraft cannot arbitrarily change. It can be reduced only according to a certain clause of the contract in case of a dishonest client’s attitude or increased, but only after the conditions of such a service are agreed and signed both by the bank and by the potential borrower.
Overdraft limit
What is an overdraft limit ? This is a certain part of the amount of regular cash inflows to the client’s account, the amount of which is determined by the bank on the basis of various indicators, depending both on the card user and directly on the financial institution. Some may provide large amounts and knowing almost nothing about the borrower, but the percentage for use will significantly exceed that in other banks, as if compensating for possible risks. Overdraft can be connected to various accounts of a potential client. This can be either a current account, for the use of which it is necessary to visit a bank, or a regular card account . Such a card with an overdraft limit allows you to use funds that are not yet on the account, but as soon as they enter it, the amount of debt will be automatically repaid.
Overdraft term
Each such type of lending has a certain period during which the amount of debt must be credited to the client's account. As well as calculating the overdraft limit, the turnover period is calculated by the bank on the basis of all the information available to it on receipts to the borrower's account and about him personally. The better the financial performance of the client, the more often the money comes to him, the better the credit history and so on, the greater the amount that the bank can provide. That is, a private entrepreneur who constantly receives certain amounts into the account can count on a large overdraft limit. This applies not only to entrepreneurs or legal entities. It may well be that an LLC with large turnover can receive large amounts of money into its account in a certain bank, but it is irregular and quite rare. In this case, the question of such a loan may not even be raised.
Overdraft repayment
Under certain conditions, such a loan may not be repaid automatically when funds are credited to the account. This happens when the client has been working with the bank for a long time, has a long positive credit history and can tell anyone what the overdraft limit is. The Bank understands the reliability of such a borrower and offers him more favorable conditions, which, on the one hand, are designed to keep him among their own customers, and on the other, are able to increase the well-being of the client. That is, in this case, the overdraft is extinguished consciously and only by the amounts that the borrower allocates for this at a convenient time for him.
pros
The main and main advantage of this type of lending can be considered the ability to make payments with funds that are not yet available. This dramatically increases the convenience of using the account, makes life easier for the client, and in some cases (especially for entrepreneurs or legal entities) allows you to conclude more profitable transactions without looking at the balance of available funds. In addition, in most cases, until the borrower has “climbed” into the overdraft limit, this does not oblige him to make any payments. Commissions are also not withdrawn from it. This makes it possible to feel more confident, even if the use of credit is extremely rare. That is, if necessary, the client knows for sure that he has the opportunity to pay his bills.
Minuses
Overdraft limit is a scourge for people who are unable to keep track of their own finances. They simply cannot stop if they know that they can spend some more money. Unfortunately, such individuals recall that they will have to be returned in the future, too late. In many cases, this moment becomes a problem in the relationship between the bank and its client, since from the point of view of a financial organization, it simply makes it possible to spend money if necessary. The borrower believes that he was almost forcibly forced to use the money, and now they also charge a fee. This ends most often with the fact that either the bank closes the limit, or the client who has taken control of himself independently asks for it.
Overdrafts at Sberbank
One of the most favorable conditions for the provision of such a service is in Sberbank. The bank analyzes the financial condition of the client, himself and his credit history, after which he makes an offer to connect the overdraft limit in Sberbank. The amount of such a loan can vary within wide limits and completely depends on the borrower, his operations with the account, funds received there and many other parameters.
Summary
In general, the overdraft limit is an opportunity provided by financial institutions to spend more money if necessary. Those who are able to take into account their own income and expenses will be able to use this option for their own benefit, and even earn more than they have to return (even taking into account the interest). People who cannot resist shopping are advised to refrain from using this service in order to avoid overpayments and problems in the field of lending.