Debit balance and revolving loan – a way to make quick money
Revolving loan – what is it and what does it consist in?
Revolving loans also called credit lines are actually one product, appearing under two different names. Although you can find the first one more often, most people still have a big problem explaining what a revolving loan actually is.
What is a revolving loan?
A revolving loan is a loan assigned to our personal savings and checking account. The funds obtained in this way can be used for any purpose (e.g. for current expenses), provided that we do not exceed the limit set in the agreement with the bank.
The funds can be used at any time, and their withdrawal is not subject to additional procedures related to e.g. creditworthiness testing, thanks to which access to the credit line is very fast. Most often it is confused with debit, despite the fact that they are two different financial products.
Revolving loan and debit
Although both products are designed to be a quick source of cash, there are 3 basic differences between them.
- Amount – overdraft allows borrowing a small amount from the bank, while a revolving loan allows for greater debt.
- Repayment time – a customer using a debit usually has 30 days to pay it back, while a revolving loan can be repaid for up to a year (with an option to extend the deadline).
- Costs – granting an overdraft is usually free. Those using the credit limit must pay the bank a specific commission.
Revolving loan, what does it consist of?
What is a credit line? As we mentioned earlier, it increases the balance of funds available on the personal account by the amount specified in the contract. The exact conditions depend on the offer of a particular bank, but most often such a product is launched for a year with the possibility of automatic extension. The amount of the limit depends on the client’s financial standing and creditworthiness and can be both 500 and 150,000 PLN.
A revolving loan calculator
The repayment time and the commission amount are set by the bank, however if you want to check the commission, interest rate and APRC of a revolving loan, you can use a tool such as a revolving loan calculator. After entering the limit amount and repayment period, you will receive information on the terms of the contract.
A revolving loan for companies
In most cases, banking products available to individual customers are also an offer for companies. It is similar with a revolving loan.
An entrepreneur who conducts business for some time (usually the minimum required period is a minimum of 12 months) may apply for a credit line. Depending on the bank, the maximum loan amount may be PLN 500,000 (example: mYBank revolving loan).
Revolving loan – offers
An account with a revolving loan is present in the offer of almost all banks operating in Poland. Below are some suggestions for them.
A revolving PKO loan is granted individually depending on the customer’s creditworthiness. Users of traditional accounts can count on a limit of up to PLN 100,000, but holders of Aurum and Platinium II accounts can receive up to PLN 150,000.
Revolving or cash loan?
Most of us use the loan when we have a real urgent need and most often reach for a cash loan, which is “one-off”. After receiving the funds, we allocate them for a specific purpose, and then pay the liability for the period specified in the contract.
The cash loan works great in this role, provided that you don’t need additional funds right away. The loan procedure takes much longer than using the limit already granted.
In addition, the amount of fees in the case of a revolving loan is much lower than that of a cash loan. When choosing a product that is best for you, first of all, you should answer the question whether I care about having permanent access to additional funds or I’m only interested in a one-time loan.
Debit balance – how does it work?
The account overdraft (acceptable debit balance) appears on our account when the available funds are exceeded. This situation only occurs when the bank starts such a service for us, otherwise, if the account balance would show 0.00 PLN, it would be impossible to perform any transaction. The limit in the debit balance is set individually with the customer, but most often it is up to PLN 5,000.
The debit was created for people who often need extra cash but do not want to use the installment loan. Using overdraft is extremely easy, and thus – very often addictive. It happens that when we have an account overdraft, we use it every month, and after a while we use the funds that we have deposited into the account to pay it off.
However, if you control your expenses and watch over the repayment date, then this product, like a credit card, is completely secure. However, it may be risky to be allowed to do so, which is called an unacceptable debit balance. We deal with this problem when we exceed the debt repayment date or the limit granted.
In such a situation, the bank begins to collect increased interest on the amount of debt, which may even result in closing the account. Information about the negative debit balance will also be forwarded to Retrodatabase, which in the future may significantly thwart our plans related to the next loan or credit.