Do you often use your overdraft facility to afford one or two extras? Is your current checking account only cleared immediately after receiving your salary and is it otherwise in the red? Then it is high time to deal with the subject of the dispo trap. Otherwise, you run the risk of experiencing serious financial difficulties within a short period of time. Find out how to find out from the dispo trap and which alternatives are significantly cheaper.
The overdraft facility: only apparently cheap and convenient
Most of the time, customers receive an overdraft facility without an application. The bank will only tell you that you can overdraw your account up to a certain amount.
Unfortunately, this form of credit is far less advantageous than most consumers think. The interest on the overdraft facility is regularly over ten percent, most recently at almost 15 percent.
If you take this loan for a long period of time, the interest payments will add up considerably. In addition, the overdraft facility leads to spending more money than consumers actually have. You will find yourself in a very uncomfortable situation if the bank terminates the overdraft facility and asks for immediate repayment. A credit institution is entitled to take this measure at any time without giving reasons. If you are then unable to meet this requirement immediately, you are in a debt trap.
An installment loan as a cheaper alternative
It’s best to never let it get this far and use your overdraft facility only exceptionally to bridge a short-term financial bottleneck. To finance larger purchases, such as a newly fitted kitchen or a car, you are better served with an installment loan. With this loan, you pay significantly less interest and automatically make repayments with the monthly installments. This means that you are debt-free again after the contract has expired.
For example, if you take out an installment loan of 10,000 dollars with an effective interest rate of 3.5 percent and a term of 60 months, you only pay a monthly installment of 181.92 dollars.
Money on-demand with a credit line
If you don’t want to do without the flexibility of overdraft facilities, you should take a look at the relatively unknown framework Good Finance. With this type of loan, the bank provides a personal credit line, for example in the amount of 5,000 dollars. If there is not enough money in a month, you can withdraw money from the credit line with a transfer. The biggest advantage here is the significantly cheaper interest rates.
It doesn’t work without discipline: avoid new debts
If you have difficulty balancing your overdraft facility, reschedule it using an installment loan. You have to control your expenses so that you don’t end up in such a situation again in the future. The easiest way to do this is with the well-tried household book. Here you enter all income and expenses. So you can quickly see in which area there are savings opportunities.
Saving is always associated with foregoing consumption, but at the same time, you also enjoy the good feeling of having comfortable financial scope instead of high debts.