Revolving loan and overdraft account what is the difference?
How quickly can I get a loan from the bank? Protect yourself against all contingencies and before, before life surprises us, try to get financing in the form of a revolving loan or overdraft? Both products allow you to use the bank’s money in an emergency. What is the difference? Or maybe they are the same products under a different name?
What is the difference between a revolving loan and overdraft?
The revolving loan is granted in the customer’s account at the same bank, after signing the loan agreement and paying the commission, and the debit can be made available even after talking to the adviser by phone. Both products allow you to quickly get money from the bank, for any purpose
Overdraft and a revolving loan
Contrary to popular belief, account overdraft and revolving credit are two separate credit products that banks make available to their clients after verification of creditworthiness and creditworthiness. Although these products can perform the same functions – they are a financial cushion for any eventuality, for any purpose, but there are fundamental differences between them.
Identity feature for both products is that revolving credit and overdraft automatically pay off each time you pay into the account of the customer – the borrower.
Distinction between overdraft and revolving credit
When applying for a revolving loan, the customer must sign a loan agreement with the bank, although the formalities are simplified here, at least in comparison with applying for a cash loan or a car or mortgage loan. Most often, you will have to pay a bank commission for a revolving loan, while overdrafts are usually granted free of charge and without another contract being signed.
You can apply for a debit at the bank where the customer has a settlement and savings account. The process of obtaining a debit requires a minimum of formalities – usually just call or click the appropriate option in electronic banking.
A revolving loan is a credit line and allows for more debt than overdraft – this allows you to borrow only a small amount from the bank – several hundred or several thousand dollarss. The credit line may amount to several times higher. The overdraft period is shorter and is generally 30 days, while a revolving loan can be repaid for up to a year, with the option of extending the repayment period for next 12 months.
When should you use overdraft and when from a revolving loan?
If we need a relatively small loan and we are able to pay it back quickly, overdraft will be a good solution. We will obtain it quickly, provided our credit history or cooperation with a given bank is positive. On the other hand, a revolving loan in your account will be a suitable offer for customers of banks who need more cash and want to pay off their current income in for at least a few months