It is worth considering the available forms of credit before making your final choice. Very often advertised as extremely attractive, loans or cash loans have high commissions and hidden fees, e.g. for insurance against death or loss of a job.
On the other hand, the possibility of debt in the form of an overdraft is possible primarily for people who have an account at a given bank and in addition receive regular inflows for a minimum of several months.
Conditions for obtaining a loan and account debt limit
To get a cash loan, it is often enough to have some free time and a document with a photo. This is the case with Good Finance, for example, where one visit to a branch and one document is enough to get a loan (and if you do not have an account, just present a second document with photo, e.g. driving license). The bank also does not require any sureties or other additional collateral. As you can see, the path from the need to get cash is extremely short.
Greater requirements must be met to obtain the possibility of current debt in the current account (savings and settlement account), i.e. account limit. Such a limit can be obtained by a customer who has had an account for at least several months and can also document his employment and the amount of remuneration in the form of a salary certificate.
The option of obtaining an account limit is also available to new customers. In this case, however, it is required to transfer the current account and document a positive history of the account service. What’s more, the new Bank may grant such a customer a higher credit limit than he was entitled to in the previous bank, such as in E-Money in the “same limit +” option, where the limit may be increased by 20% from the current one. E-cash has an attractive revolving loan offer in its account among its financial products, which does not require submission of an earnings certificate from the employer, as long as the customer has made regular payments to his account for six months.
It is also worth paying attention to the fact that the cash loan is granted for a period of several to several dozen months, while the loan in the account is granted for 12 months and automatically extended if its servicing went smoothly. In both cases, it is not necessary to state the purpose for which the money will be allocated.
The amount of debt in the account and the loan amount
Customers applying for a cash loan can get much higher amounts than a revolving loan. Good Lender Bank may grant a loan of up to USD 150,000 if the customer has such creditworthiness or is supported by a guarantor.
Credit limits on ROR accounts in most banks depend on the amount of monthly inflows to the account. Good Finance and Good Credit set limits equal to 6 times of monthly inflows. Of course, for customers with a shorter bill history, the amount will be lower than for those who present a positive, unquestionable account opinion.
Comparison of interest rates, commissions, and fees
When analyzing the interest rate and additional costs of the loan, revolving loans are much more favorable here, as their monthly interest rate is usually lower than that offered in traditional loans.
The commission for granting a loan is also lower, because with ‘cash’ the commission is usually 5%, and with a revolving loan it ranges from 0.5% to 2%. Other fees in the case of a revolving loan are a commission for increasing the limit during the term of the contract, a commission for extending the repayment date or fees related to securing the loan.
The cash loan is repaid through predetermined installments, the amount of which can be fixed or decreasing. A loan in the ROR account is a permanently available and renewable credit line.
The only condition is not to exceed the allocated limit. What’s more, the granted revolving loan can be used many times, as each payment to the account simultaneously reduces the debt and renews the limit of available funds.
Overdraft or cash
Overdraft is a more interesting solution for people with a long and positive account history at their bank. It allows permanent use of the loan when the financial situation requires it without unnecessary formalities. You do not have to remember about installments, because the loan is repaid through current inflows to your account, which makes it even cheaper.
Finally, it is worth adding that both forms of financing may prove to be an expensive solution due to the high costs of e.g. commission for granting or renewing an account loan, which is why you must always use this type of solution carefully. Each time we also carefully read the contracts and regulations (often there are many so-called “hooks”) and compare offers available on the market.