The loan offers offered by banks are very diverse. Each bank can offer at least several options to borrow additional cash. However, the most commonly used product is the overdraft limit, ie the so-called ROR loan, available to virtually all bank customers.
What is this loan?
A loan in the current account is simply a loan in the savings and checking account which we can use on the terms previously agreed with the bank. It gives the possibility of borrowing in the bank up to the agreed amount. Even if we see zero on our account, we can still use the cash up to the limit granted. In this way, we take out a loan, which we are obliged to repay within the prescribed period.
How to get it
The most important criterion for obtaining a loan in a savings and checking account is having a personal account in a given bank for at least six months. Most banks after this period will agree to a loan in the current account. In addition, the personal account must be topped up with monthly salary payments. Based on the inflows to the account, the bank can assess what limit can be granted to us. This must be the amount that the borrower will be able to repay. The limit amount is granted individually. Usually, however, it is 6 or 8 times the salary that affects the account. A necessary condition is, of course, signing a contract with the bank for an account limit. It is a renewable limit, allocated for 12 months, but after this period it is possible to extend it for another year.
The big advantage of an overdraft facility is that interest is charged on the amount actually used, not on the amount of the limit granted. Because it is a revolving loan, after repayment we can use the allocated limit again. Banks charge a preparation fee, as well as a commission for granting and using a loan, a commission for increasing or renewing a loan for the next period, as well as fees related to loan collateral for considering the loan application. In addition, banks also offer credit insurance in the event of death, temporary incapacity for work, job loss or serious illness. However, there is no obligation to use these suggestions.
Which is better: loan or credit in ROR?
The difference between a loan and an overdraft facility is that in the case of a limit, interest is charged only on the amount that will actually be used. So if we need additional finances for a specific purchase, it will be better to use the account limit, if of course it is enough. We can confidently use such a loan, we do not need to settle complicated formalities. However, easy access to cash also has its drawbacks and can cause debt repayment problems.