Overdraft facilities are automatically loans that come into effect when a checking account is convincing and thus falls into the debit (minus). Since almost all current accounts, where overdraft is possible, accrue both the credit (debit) and the debit (debts), overdraft credits can quickly become very expensive for the current account holder.
Because while the interest on the credit often fluctuates only between 0.5 and 2 percent per year, an overdraft facility can quickly earn interest at around 15 percent per year. So if the account is involuntarily overdrawn, the current account holder incurs enormous expenses each day in relation to the total value by which the account was overdrawn. In such cases, a loan is suitable for account balancing, because a voluntarily taken installment loan is always better in its terms than an expensive automatic overdraft facility.
In addition, being in the negative with a checking account does not necessarily imply that the borrower has a financial bottleneck. Often it is much more than this that bills are debited too early or the use of the wrong EC card causes a checking account to quickly fall into the red for a short time. Nevertheless, borrowing an installment loan is often worthwhile even if the current account would only be in the red for a few days, for example until the next salary is transferred.
Choose the better conditions
A credit for the account balance is always only about minimizing the costs incurred by the minus. If an invoice was actually incorrectly debited too early or unexpectedly, the current account holder can also quickly transfer money from another account to the overdrawn account, thereby keeping costs low. Of course, this presupposes that financial means are available to balance the account again.
If this is not the case, a loan should definitely be taken out for the account settlement. Even if it is only a period of one to three weeks in which the account is overdrawn, the much lower interest rate of a conventional installment loan still pays off. In order to be able to take out the loan for the account settlement, potential borrowers should bear in mind that, in the ideal case, it is really only a short-term matter.
If the account is permanently in the red, this is usually due to the fact that the person concerned already has a low credit rating. Then it will also be difficult to take out another loan because the bank could well refuse it. It is definitely worth trying.