Overdraft - what is it in simple words? Essence, conditions, connection

2024 Author: Howard Calhoun | [email protected]. Last modified: 2023-12-17 10:16

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 quite an interesting way to obtain credit funds. It is presented in several varieties. An overdraft is a loan provided when you overdraw your account. It is issued for a short period of time, therefore it is repaid immediately upon receipt of money into the account. Low interest is charged on it, and its limit depends on the movement of money in the account.

The concept of overdraft

There was such an offer in Russian banks relatively recently. An overdraft is a loan that is issued for both individuals and individual entrepreneurs and companies. Its unique features include:

• it can connect to credit cards or deposit cards;
• due to this feature, a citizen can spend a little more money than he has in his account;
• this overspending is represented by a short-term loan;
• debt is repaid immediately upon receipt of funds to the account;
• the option is activated only after a long use of the services of a particular bank, since based on the cooperation data, the optimal overdraft limit is formed.

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

Overdraft example

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

• the owner of a salary card receives 40,000 rubles a month into his account. on time;
• the bank offers him to connect an overdraft on favorable terms;
• 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 there are only 40 thousand rubles in 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 an overdraft is to provide an opportunity for conscientious borrowers to slightly exceed the existing limit on the card.

How is an overdraft different fromloan?

An overdraft is a certain type of loan, but it differs from a standard loan in some parameters.

Parameters	Credit	Overdraft
Credit term	There is a strictly defined period that exceeds three months	Maximum available for 15 days
Refund policy	Repaid in small monthly installments	When the amount is credited to the account, the entire debt is immediately returned
Interest	Short	Higher than consumer loans, but due to the short loan term, the overpayment is negligible
Design rules	To get a new loan, you need to submit an application every time	Automatic limit updates provided

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

Varieties of overdraft

This banking option is presented in several forms, designed depending on the desires and capabilities of the clients themselves. Varieties stand out:

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

Each option has its own terms of registration, application rules and nuances.

Standard

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

Banks provide such an overdraft if the following conditions are met:

• work experience in one company must 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;
• there should be at least 12 cash receipts to the account per month;
• open loans or other violations by the client of the institution are not allowed.

To calculate the limit, the minimum turnover on the account is taken into account. Such overdraft conditions are suitable only for people who regularly receive funds to the account, and also work with significant turnovers of money. Typically, clients are individual entrepreneurs or owners of medium and large businesses. The default rate is 14.5%.

Salary

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

Salary overdraft is an interesting offer for every person whosometimes it is necessary to exceed the cash limit available 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 overspending, you can spend funds for any needs, and you do not need to account for it to the bank;
• The interest rate is calculated solely on the money actually spent, as well as for the days when the loan was used;
• cons include a low credit limit, which does not exceed 2 salaries of a citizen;
• refunds required within three months.

You can 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 must be transferred to the account of a banking institution;
• the employer must transfer funds to the card without delay;
• limit depends on cash receipts;
• The interest rate will be much higher than with a standard consumer loan.

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

For collection

This type of loan is intended only for business representatives. They should enjoy 75% of the proceedsloan turnover. Such proceeds may be deposited into an account for crediting. To use an overdraft, it is required to draw up an appropriate agreement, and as a standard it is formed for one year. If necessary, it can be easily extended.

Tranche is provided for a maximum of 30 days. Overdraft conditions for collection are as follows:

• minimum business representative must be engaged in the chosen activity for one year;
• the client must have regular and high income from different settlement accounts of the same bank;
• guarantee required from another business owner;
• A minimum of two regular buyers must be verified.

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

Technical

Considered the easiest to make. Banks offer such an overdraft without analyzing the financial condition of the borrower. For this, only cash receipts within three days to a citizen's account opened with a bank are taken into account. Provided for a limited amount of time, after which it closes.

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

• if there are accounts opened in other banks, then you must take in advance the relevant certificates from these institutions confirming the receiptfunds;
• preparing confirmation of all turnovers for six months;
• need documents indicating that the citizen has no debts on other loans.

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

Advance

This loan is available only to certain bank customers. They must be verified, have been cooperating with the institution for a long time and have a significant income. Such a credit overdraft is offered only by the banks themselves, so applications from customers are rarely approved.

Its main features include:

• borrower must be officially employed for at least one year;
• if a loan is granted to an individual entrepreneur, then he must conduct successful activities for more than a year;
• the number of receipts per month must exceed 12 times;
• during the year it is required to use different bank services, which include settlement and cash services;
• zero turnovers are not allowed on the account;
• must not have any unpaid claims or orders.

When determining the limit, the minimum turnover for the last month is taken into account, and various credit transfers are preliminarily deducted from it. The interest rate is usually15.5%.

Design process

Many people who are regular customers of banks are aware of the value and benefits of using an overdraft, so they often apply for its connection. How to connect an overdraft? The registration process is divided into successive stages:

• Initially, you must have a valid current account, which a citizen must regularly use for at least 6 months;
• an application is being formed to connect the option, and it is allowed to specify the desired limit size 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, certificates from other banks in which accounts are opened indicating the movement of funds on them, documentation for various property belonging citizen;
• if you transfer a certificate of ownership of an apartment or house, this can positively affect the size of the limit and the interest rate, since the bank will be sure that if the borrower cannot return the funds, then they can be returned by force, so how the borrower is financially secure;
• certificate of income must be submitted;
• Based on the documentation received, the bank employees determine the expediency of connecting the option;
• if the answer is positive, then the applicant is notified;
• calculation of the optimal size of the limit;
• an agreement is being formed, studied by a potential borrower;
• if he does not have any claims, then hesigns this agreement.

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

In Tinkoff Bank, overdraft conditions are considered acceptable for each recipient. Only cardholders of this bank can issue it. If you spend no more than 3 thousand rubles. out of the offered limit, you do not need to pay any commission. If more than 3 thousand rubles are spent, then a commission is charged daily.

The nuances of connecting an overdraft by companies

This opportunity is offered not only to individuals, but also to companies. Each bank has its own requirements for beneficiaries. To connect such a service, companies must prepare certain documentation. These include:

• papers from banks where there are open current accounts;
• constituent documentation of the organization;
• Cash flow statements;
• certificate from the Federal Tax Service on the absence of tax arrears;
• financial statements confirming the profit of the organization.

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

Pros and cons

Connecting an overdrafthas both advantages and significant disadvantages. Positive features include:

• there is always an opportunity for a citizen or company to spend more funds than is available in the account;
• the limit is automatically updated, so you do not need to issue it again every time;
• not required to report expenses to the bank;
• Not only can you use non-cash funds, but you can also withdraw cash.

The following parameters are classified as disadvantages:

• interest is considered significant, and it is much higher than the rate set on 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;
• required to pay an account opening fee;
• if the loan increases at the request of the client, then this process is usually paid.

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

Can a bank refuse to connect an overdraft facility?

Overdraft is intended exclusively for permanent, solvent and responsible borrowers, so often citizens who want to connect it to their card face a refusal from the bank. He can bedue to various reasons:

• a citizen uses the services of a bank for less than six months;
• he doesn't have a stable and steady income;
• there is too little turnover of funds in the account;
• work experience is less than one year.

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

Thus, an overdraft is considered quite an 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 a long time. Often applications for connecting this option are rejected for various reasons. Before applying for such a service, you should evaluate not only its advantages, but also significant disadvantages.