The size, terms of provision, and procedure for repayment of the overdraft are regulated by the banking service agreement. Its limit is set by the bank based on an analysis of cash receipts and transactions carried out on the card and can be changed over time. In any case, overdraft:

• is short-term in nature;
• entails the accrual of interest for using the loan;
• must be returned in full before the end of the billing period;
• requires security for obligations;
• provided if there are no complaints against the client;
• As a rule, it does not provide for preferential lending procedures, but exceptions are possible.

Types of overdraft

Overdraft happens:

in relation to the ownership of funds

• permitted (provided by the bank);
• unauthorized or technical (exceeding the established limit entails penalties);

depending on repayment terms

• continuous (the debt is repaid in installments over the agreed period, until the end of the contract);
• with zeroing (using this type of overdraft requires the systematic payment of the full amount of debt within the period established by the bank, most often within a month);

by the nature of the security

• blank, i.e. without security or with one guarantee;
• secured by the borrower's property.

After opening a current account, legal entities may be provided with advance overdraft. To confirm the solvency of the organization, it is necessary to present a certificate with performance indicators. Promsvyazbank offers the Credit-Overdraft service and makes it possible to receive 300 thousand - 22.5 million rubles for business development. However, the financial institution has set strict limits on the possible limit: the amount cannot exceed 50% of the average monthly turnover on the borrower’s current account over the last six months. But Baltinvestbank offers no more than 40% to current clients.

Offers for individuals

Not only organizations, but also individuals can use an overdraft. Naturally, the limit in this case is affected by the documents submitted, as well as the nature of the transactions on the account. For example, IntrustBank cardholders can spend 1 thousand rubles in excess of the balance, the service fee will be 28%. However, if the limit is exceeded, a rate of 36% will apply.

Unlike IntrustBank, SMP Bank provides an overdraft on more favorable terms for the SMP Transaero and SMP Aeroflot Bonus cards. Firstly, the maximum amount is 1 million rubles. (MasterCard Platinum), owners of gold and standard cards can count on a limit of up to 600 and 300 thousand rubles. respectively. Secondly, there is an interest-free period (55 calendar days). Thirdly, the fee for using the service is 19.99-27.99%. However, if an overdue debt occurs, the penalty will be much higher and will amount to 55% of the amount presented for repayment.

At Sberbank, gold card holders have the opportunity to receive an overdraft in the amount of up to 45 thousand rubles. at 20% per annum. In this case, the client must repay the overdraft debt in the amount specified in the report no later than 30 days from the date of this report. If you fail to repay on time and exceed the limit, the rate will increase to 40% per annum.

Which is better: credit limit or overdraft?

Of course, loans and overdrafts have common features, but these are two completely different services, because:

• in the first case, a credit card is issued, in the second - a debit card;
• the actual size of the credit line exceeds the overdraft amount;
• a credit card is opened at the client’s discretion, the decision to allocate an overdraft is made by the bank;
• the loan can be repaid with minimal payments during the entire validity period of the card, overdraft is returned in a shorter period of time and in full;
• The credit limit, as a rule, is not reduced by the bank, and the overdraft may be completely excluded.

Thus, when choosing one or another product, you should rely on your needs. If you plan to constantly use the loan, it is better

In the process of economic activity, many companies are faced with a very contradictory situation: raw materials have already been purchased and the time has come to pay suppliers, but the products themselves have not yet been sold.

As a result, there is no revenue, and therefore no funds to pay off accounts payable. It is for such situations of short-term business insolvency that an overdraft loan was created.

This type of lending, such as overdraft, appeared in the Russian economy relatively recently, but has already gained popularity among companies experiencing temporary financial difficulties due to the specifics of their business activities.

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An overdraft loan is a short-term loan that a bank provides to a company in case of insufficient funds in its current account.

An overdraft loan is characterized by the following features:

1. It can only be obtained by companies that have a current account with this financial institution.
2. Only responsible and reliable clients can count on it.
3. The bank sets a limit on the loan amount and the period for its issuance.
4. Overdraft is short-term in nature - from several weeks to several months.

Overdraft business lending is implemented on the basis of Article 850 of the Civil Code of the Russian Federation.

The legal basis is the annex to the agreement on opening a current account, which is signed by a legal entity with the bank.

An overdraft can arise only when, in the course of business activities, while paying another counterparty, the company discovers that there are insufficient funds in the account.

Goals

There are no strict legal restrictions on what exactly overdraft funds should be spent on. The main thing is that all costs are related to the business activities of the company.

Thus, a loan provided by the bank can be spent on:

• purchase of raw materials and materials;
• salaries of the company's employees;
• covering obligations to the budget and extra-budgetary funds;
• purchasing equipment and other goods needed by the business.

Overdraft funds are prohibited from being used to repay loans from other banks.

This limitation occurs because the funds are not directed directly to production activities, which contradicts the very essence of the overdraft.

Requirements for the borrowing company

As mentioned above, only those legal entities that have a current account with a given bank and have proven themselves to be reliable clients during their cooperation with it can count on an overdraft.

There are a number of strict requirements that a company must meet, namely:

1. At least 1 year must pass from the moment of state registration of a business, although some Russian banks set the bar at 3 years.
2. Funds must be constantly transferred through the company's current account, which is evidence of active business activity.
3. Each financial institution sets a minimum limit for monthly turnover of funds in a client's account. Companies that fail to achieve it are automatically denied an overdraft.
4. There are no cases of seizure or suspension of operations in the history of the current account.

Overdraft lending is only for those companies that have proven themselves as responsible and serious partners for a long time.

The longer a company is a client of a given bank, the larger the overdraft it can count on. The term and amount of the loan also increase if the company’s turnover grows regularly over the course of six months.

How to get

For legal entities, the process of obtaining an overdraft depends on whether the account opening agreement contains an annex regarding an overdraft or whether there is none.

If there is an application, the company must prepare the following documents and submit to the servicing bank:

• application for an overdraft;
• a certificate from the bank itself stating exactly what kind of turnover was made on the company’s accounts over the past six months;
• document confirming that there is no outstanding debt to the bank.

All the above papers are considered, as a rule, within 1-2 working days, after which the banking commission announces its decision to the client.

In the absence of an application, the bank must first enter into an additional agreement with the company, the basis of which will be a package of documents that includes the constituent documents and financial statements of the company.

In order for the bank to provide an overdraft loan, the client will have to write an application.

Only after this the financial institution will decide whether to grant an overdraft or refuse to issue it. The funds limit will be set depending on the size of turnover over the last six months.

Overdraft costs

An overdraft, like a regular loan, is provided to the client strictly for a certain period, which is 30-180 days. If the previous overdraft loan is not repaid, then there is no point in counting on receiving the next one.

In addition to the loan repayment itself, there are other costs for servicing an overdraft, including:

• The interest rate on the loan, which depends on the period of operation of the company and its revenue.
• Overdraft processing costs.

For their regular and reliable customers, many banks provide a grace period for lending and also reduce the interest rate as much as possible, which makes this type of lending more profitable than traditional loans.

Among the costs, it makes sense to mention collateral property. The fact is that a company wishing to attract a large overdraft usually presents movable or immovable objects to the bank as collateral. In this case, another additional agreement regarding collateral relations is drawn up.

Difference from loan

Despite the fact that an overdraft is a type of bank loan, it still has specific features that distinguish it from typical short-term loans, in particular:

1. It does not draw up a lending agreement, but only an appendix or additional agreement to the account opening contract. It specifies the term of the loan, the limit of funds and the interest rate.
2. The overdraft only comes into effect when the funds in the company's bank account are depleted.
3. The loan provided does not have a specific purpose: it is only important that the funds are spent on the business activities of the company.
4. The procedure for obtaining an overdraft is more convenient and simpler and does not require filling out a huge number of papers, and the period for reviewing documents is also reduced to a minimum.

If, having opened a bank account, the company strictly fulfills its obligations, then after six months it can already count on receiving an overdraft loan without any special difficulties and tedious procedures.

Cards with overdraft

If the basis of a profitable short-term loan for legal entities is a bank account, then for individuals it is an overdraft card, the use of which is more profitable than a small consumer loan.

You can get it by contacting any of the bank branches that work with this product and concluding an additional agreement based on an existing credit or debit card.

A card with an overdraft allows the client to spend funds in an amount greater than what is available on it, in particular:

• Credit card with an overdraft implies that in some cases the client can directly use it to attract an additional short-term loan in addition to the funds already provided by the bank.
• Debit card with an overdraft implies that a bank client can use a short-term loan if his own funds in his account are not enough to purchase goods or services.

Currently, most banks provide customers with a grace period on an overdraft card. If the client manages to repay the loan during this time, he will free himself from paying interest on the overdraft.

Overdraft is an excess of the limit of funds on a debit card currently available for use. You can explain what an overdraft at Sberbank is using the following example: you have 1,000 rubles on your plastic card, and in a store you liked a product worth 1,400 rubles. You can pay with your card or withdraw 1,400 rubles and purchase the desired product if the overdraft service is available to you. The idea is that you take out a small loan from Sberbank at interest, which you undertake to repay within a certain time.

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The overdraft service can be connected to a debit card (in rare cases, to a credit card). It can be used by owners of all classic, gold, platinum, premium, and youth payment systems Visa or MasterCard.

What is an overdraft at Sberbank?

At the time of the introduction of this service, it was available only to legal entities. Overdraft was introduced with the aim of ensuring a constant flow of cash turnover for companies, which, if there was no money in the account at the moment, could use borrowed money, after which, when money arrived in the account, the required amount was debited automatically.

IMPORTANT: according to the bank’s terms and conditions, when using an overdraft, the bank has the right to directly write off a fee from the client’s card to pay off the debt. This means that funds are written off automatically, regardless of the desire or unwillingness of the owner of the funds.

Today, overdraft is also available to individuals. Depending on the situation, the service is connected to the card automatically, or upon written application from its owner.

1. The overdraft limit is set by the bank for each client individually based on the data received about him (amount of income, regularity of cash turnover on the card, and so on).
2. The amount ranges from 1,000 to 30,000 rubles for individuals, from 100 thousand to 300 thousand rubles for legal entities.
3. The interest rate is 18% per annum if the account is in rubles, 16% if the account is in foreign currency.
4. The period of provision is 12 months. That is, a certain limit is set for a period of 1 year, and during this time you can use overdraft funds from time to time.
5. The debt repayment period is 30 days. Within a month, the funds used through the overdraft must be returned to the card in full.
6. In case of exceeding the limit or the amount of debt is calculated at a rate of 36% for a ruble account, 33% for.

What is the difference between an overdraft and a loan?

Overdraft is similar in some ways to a loan, but there are significant differences between these two concepts.

• Overdraft is available for both debit and credit cards, but is most often used by debit account holders.
• Overdraft limits are significantly lower than credit limits.
• Getting access to an overdraft is much easier, the conditions are more favorable than when issuing a loan.
• The interest rate for using borrowed funds is 18%.
• The repayment period must be within 30 days, otherwise sanctions will apply.
• The amount of repayment must be in full, and not in parts, as when using a loan.
• In case of violation of the terms of use and repayment of the debt, recalculation is made at an increased rate - 36%, and from the first day of using the money, and not from the moment the delay begins.

Overdraft for salary card

Sberbank willingly provides salary card holders with the opportunity to use funds through an overdraft, since they are considered reliable clients with confirmed solvency, because the monthly receipt of money on the card guarantees timely repayment of the debt.

The overdraft limit in this case is set by the bank based on the number and amount of cash receipts. The limit cannot be more than the average monthly salary. Sberbank most often sets a limit of 50% of the client’s salary.

When an advance and salary are received on the card, the fee is first written off to pay off the overdraft debt.

Overdraft for credit card

Each client decides for himself whether it is advisable to use an overdraft on a credit card, since funds are already borrowed from the bank at interest, but providing such a service is possible. Situations can be different, and money may be needed urgently, but it has been exhausted, and there is simply nowhere to get it from, then an overdraft on a credit card will help to get out of the situation.

Overdraft is provided to credit card holders upon confirmation of solvency. The positive decision of the bank is also influenced by additional confirmed sources of income, the presence of other debit cards or the presence of an open debit account, which is a guarantor of debt repayment.

How to apply for an overdraft at Sberbank?

To apply for an overdraft, you must have a Sberbank debit card (for individuals) or a current account (for legal entities). Based on data on cash flows on the card or account, as well as other documents provided confirming the client’s solvency, the bank makes a decision on the amount of the limit.

How to arrange a service for a legal entity

To register, you must visit and provide the following package of documents:

• application for service connection;
• completed application form of the borrower (as well as the guarantor);
• legal documents for the organization;
• financial documents to confirm income.

How to apply for a service at Sberbank for an individual

• upon receipt of the card. Most often, when you issue a card, you can activate an overdraft service. To do this, in the agreement in the column “Overdraft/Desired limit amount” you will need to check the box and indicate the amount;
• submit an application at a bank branch. If you have been using the card for a long time, but are only now thinking about connecting to the overdraft service, you can come to a bank branch and write a corresponding application. You will need to provide a passport and a document confirming your income (most often this is a 2-NDFL certificate from your place of work for the last 6 months);
• through . This method is not available to individuals; it can only be used by corporate clients. If you have, then you can activate the overdraft service in your personal account via the Internet.

  First, you need to think carefully about everything and decide whether you need an overdraft when you receive the card. At the time of issuing a card, the easiest way is to refuse the service by putting “0” in the column where the amount of the overdraft limit should be indicated.

  Secondly, if the service has been activated, you can disable it only by writing a corresponding application at a Sberbank branch.

  Thus, the overdraft service on a Sberbank card makes it possible to use funds that you do not currently have. After a certain period of time, they must be returned in full. Terms of provision are not always favorable. However, by connecting an overdraft to his card, the client can always count on a certain reserve of funds in unforeseen situations.

Irina Sherbul

Bsadsensedinamick

# Business Dictionary

Definition, features, pros and cons of the service

The first overdraft was issued in 1728, when a customer was allowed to borrow £1,000 more than was in his account. The loan was issued by the Royal Bank of Scotland in Edinburgh.

Article navigation

• What is overdraft in simple words
• How does overdraft with grace period work?
• What does credit limit mean?
• Advantages and disadvantages of a banking product
• Why is overdraft dangerous?
• Conditions of provision for bank clients
• Types of overdraft
• Allowed – standard model for all types of overdraft
• Technical overdraft - what is it?
• Salary overdraft
• Micro overdraft
• Overdraft with collateral
• Umbrella
• Unsecured overdraft for a large amount
• Credit and overdraft - what's the difference?

An overdraft is a short-term microloan. A loan in the form of an overdraft has a number of features that make it beneficial for individuals and legal entities.

What is overdraft in simple words

A card overdraft is a loan that can be obtained from any ATM using your debit card. To do this, you need to sign a one-time agreement with the bank to connect the quick loan service.

The concept of overdraft translated from English means “overspending”. This service makes it possible, in addition to fixed assets, to use additional ones as a loan. Accruals are made to the salary card of an individual or to the account of an individual entrepreneur.

When withdrawing additional funds from the card, the first money received into the account will be transferred to the bank as payment of the debt.

A bank overdraft provides an opportunity to quickly receive the funds you need at the right time. But you can use it only if you are sure that you can quickly repay the debt. Failure to meet your overdraft repayment deadlines can result in high interest rates.

How does overdraft with grace period work?

The overdraft scheme is to provide a loan for a certain period, often 30 days, but with additional agreement with the bank it can be extended to 60 days. In this case, for each day of debt, a certain percentage is accrued, corresponding to the bank’s annual rate.

The grace period allows you to avoid interest charges if the debt is repaid on time. More precisely, if you take a loan from a bank in the amount of 1000 rubles, you will return 1000 rubles, without overpayments. The main condition of this option is payment of the debt within the period established by the contract.

You need to know what an overdraft limit is and fully comply with it. Violation of the established restrictions will entail penalties from the bank.

What does credit limit mean?

When you activate an overdraft, a limit on the loan amount is set. It is tied to the amount of funds turnover on the account. The limit of the established option will depend on the individual’s salary. For example, 10,000 rubles are credited to your account every month. The loan limit may be equal to this amount, but no more.

When checking your account, the ATM may display your available balance including overdraft. Be careful not to confuse fixed assets with credit.

Terms depend on the bank and your credit history. Certain credit institutions can provide a loan of up to 50% of the current amount.

Before signing up for a service, please read the contract carefully.

Advantages and disadvantages of a banking product

Overdraft is a special form of account lending, a convenient option on a bank card that will allow the owner to receive a number of advantages when a loan is needed.

Main advantages of the service:

• Low percentage. The rate is on average 2–6% lower than that of conventional loans.
• Automatic repayment of debt to the bank. If the client's account balance is positive, the funds will be automatically debited and transferred to pay off the debt.
• Independent regulation of the amount of debt. The client decides whether to use the loan or not. If a loan is needed, the borrower himself determines the amount (within the established limit) that he wants to receive at that moment.
• Fast connection. An important point that a bank employee analyzes to enable the option is the movement of funds in your current account. The banker can receive this information within a few minutes, so it won’t take much time to process a loan for your card.

The advantages listed above make overdraft one of the best ways to get a microloan. But it is necessary to take into account the disadvantages and risks of the service.

Among the disadvantages are:

• Limited possibilities for loan amount.
• Monthly repayment. It is necessary to close the debt 100% within the agreed period.
• It is necessary to maintain cash flow. The movement of funds in your account must correspond to the amount agreed upon in the agreement with the bank.

If the second and third paragraphs are violated, the bank may impose penalties on the borrower. If after 25–30 days the debt has not been paid, interest is charged, increasing the debt.

Why is overdraft dangerous?

Regularly using an overdraft, over time, clients begin to forget to return funds to their account in a timely manner. Such an oversight will lead to a number of consequences.

Failure to pay a debt on time is a violation of the terms of the contract, which may lead to:

• Fine. The bank has the right to impose sanctions on the borrower if there is a delay in repaying funds.
• Increase in interest rate. By the next loan tranche, the rate may increase by several percent.
• Denial of credit. If there is a regular delay in loan repayment, the bank may completely refuse the loan and terminate the agreement.
• Bad credit history. You should not think that if one bank refuses, you will be able to conclude an agreement with another. If you fail to comply with the bank's conditions, you will ruin yours. Every bank will know about your inability to pay your debts on time.

The danger of overdraft seems imaginary. Most borrowers believe that they will always be able to repay the loan on time, but in the end, sooner or later, many fall into a credit trap. To avoid tripping over pitfalls, follow simple rules:

• Remember the debt repayment date.
• There should be no loan debt for one day a month.
• It is necessary to maintain the cash turnover on the card agreed with the bank.
• Monitor the expiration date of the loan agreement.

Knowledge of these points will help to avoid violations and associated risks. But in order to know the terms, interest and other terms of the contract, when drawing up, pay attention to some of its points:

• Overdraft percentage.
• Commission for issuing a loan.
• Overdraft establishment fee.
• Fee for considering an application to connect the option.
• Loan application and collateral fee.
• Insurance.

Not all expenses listed above may be specified in the contract. But when registering, you must carefully study these points.

Conditions of provision for bank clients

This loan is provided to individuals and legal entities. Phys. a person receives a loan for personal needs and can use it in any situation that requires additional funds.

Legal entities may need an overdraft in three cases:

• Cash gaps occur within a month;
• business needs a short-term loan;
• the company needs to have a “financial cushion”.

The use of an overdraft gives the company ample opportunities for profit growth. If you introduce additional capital correctly and in a timely manner, you can significantly increase trade turnover.

This scheme only works if an overdraft with a grace period is activated.

Each bank sets its own conditions for using the service. But there are general rules for concluding a contract:

• The loan term is 1–12 months.
• The debt must be repaid once a month, unless other conditions are specified in the agreement.
• A current account must be opened at the bank providing the service.
• Credit and debit card turnover should be stable.

If all the conditions and nuances have been studied, then you can start connecting. To obtain an overdraft you must do the following:

1. Contact the bank employee who will provide the loan.
2. Find out under what conditions the overdraft will be activated.
3. Provide the credit department with all necessary documents.
4. Wait for a decision on activation.

Bank overdrafts are issued subject to the client meeting all necessary requirements.

Types of overdraft

There are several types of overdraft, each of which differs in interest rates, payment limits, terms of provision and methods of repayment. There are several main categories of this loan:

• accessible;
• technical;
• salary;
• micro;
• collateral;
• umbrella;
• unsecured.

To choose the best option for yourself, you need to understand the difference between them. To do this, each type should be analyzed in detail.

Allowed – standard model for all types of overdraft

An approved overdraft is a type of collateral that meets the terms of the agreement. Such a loan is considered classic and is issued in accordance with all standard requirements. The limit is set in accordance with the average cash turnover on the account, and the average rate is 14.5% per annum.

Technical overdraft - what is it?

Unauthorized overdraft (also called technical, unauthorized or prohibited). The name itself suggests that withdrawals exceeding the balance on the card occur without the approval of the bank.

The issuance of a technical overdraft can occur for various reasons, for example, there was an overdraft amount of 1000 rubles left on the card, you paid for the purchase in dollars equivalent to the balance, but while the banking transaction was being carried out, the exchange rate increased, and the cost of your purchase was 1050 rubles.

Exceeding the limit is called an unauthorized overdraft. In this case, the client will see a red balance on his card (the amount of overspending that exceeds the limit will be highlighted in red).

Technical overdraft can be provided or unprovided:

• Provided. Negotiated with the bank and included in the contract. When it occurs, you must quickly repay the debt with the specified interest.
• Unintended. The occurrence of such a case is not specified in advance; in such a situation, the borrower will be charged a fine. This possibility is provided for by the provisions of Article 395 of the Civil Code of the Russian Federation.

Regardless of the type of technical overdraft, the debt must be repaid as soon as possible, along with the established interest, which is often up to 50% per annum.

Salary overdraft

One of the classic types. It allows you to overspend your salary card. This service is in demand because it does not require additional registration and is often installed on the card immediately after it is issued.

The limit of such a loan is on average 50% of the salary amount, and the period of validity of the loan agreement is no more than 12 months.

If a client needs a loan, he can withdraw funds from any ATM or pay with a card in a store. The next time a salary arrives in your account, the amount of debt will be automatically written off and transferred to the bank.

Micro overdraft

A special feature of this loan is the minimum established limit of 300 thousand rubles. This amount is insignificant for legal entities, so banks consider this type of loan a micro overdraft.

Not taking into account the minimum limit, the remaining conditions for obtaining and repaying the loan do not differ from the classic microloan.

Overdraft with collateral

Every bank wants to be sure of the return of their funds. Therefore, when providing an overdraft option, a credit institution may require collateral as a guarantee of debt repayment.

The bank accepts the following types of collateral as collateral:

• real estate;
• circulating products;
• cars;
• land;
• equipment.

All other terms of the agreement correspond to a standard overdraft.

Umbrella

Designed for a network of companies. It is expected that this will cover the cash gaps of the entire holding, which must include at least 3 companies.

The contract is drawn up for a period of up to 12 months. The service includes the following benefits:

• no commissions;
• flexibility in choosing a repayment scheme;
• possibility of changing borrowers during the term of the contract.

An overdraft will provide a “financial cushion” for the company in critical situations.

Unsecured overdraft for a large amount

For time-tested clients, an overdraft is provided without additional collateral of property. In such a situation, stable financial turnover on the card is a guarantee of payment.

It is worth considering that this only works for borrowers who have been cooperating with the credit institution for several years.

Credit and overdraft - what's the difference?

Both services give the client the opportunity to receive a cash loan for a certain period, but the conditions for obtaining a loan and repaying it differ significantly. The main differences between a loan and an overdraft are:

• Interest rate. An overdraft is issued at a rate that is on average 4% lower than a regular loan.
• Debt repayment period. A classic loan agreement is provided for a period from several months to several years, while overdraft debt must be repaid within 30 days from the date of receipt of the loan.
• Speed ​​of obtaining a loan. Loan processing takes from several hours to several days. You can withdraw or pay using an overdraft at any time in stores or terminals.
• Sum. You can get a loan in an amount several times your monthly income. Overdraft has a limit that cannot exceed the average turnover of funds on your bank card.
• Debt repayment. When overdrafting, incoming funds are automatically debited from the account to repay the debt; for loan repayment, there is a special schedule that distributes the repayment of the loan amount over several months.

An overdraft differs from a line of credit in a number of factors. But it is impossible to say for sure which type of loan is better. Each of them has its own advantages and disadvantages. You will have to choose the type of lending yourself, depending on your individual needs.

In this article, we described in our own words and in simple language what an overdraft is. Learn to use the service, learn the basic rules and nuances, and the service will help you out more than once in critical situations.

With the development of the banking sector in Russia, more and more citizens are turning to banks for lending services. At the same time, obtaining a short-term loan in the form of an overdraft is now quite common among individuals and legal entities. But when a bank employee pronounces some terms, their essence and meaning are completely unclear to many clients. In this article we will tell you what an overdraft is, its main differences from a loan and its design features.

The essence of overdraft

An overdraft is a form of short-term loan within a certain bank limit, which allows the cardholder to make payments even if he does not have enough funds in his current account.

The term overdraft literally translated from Latin means “overspending”, “excess of credit”. In simple words, this is the provision of money at interest for a short period (up to one month). This “overspending” allows the client to use not only the funds that he currently has in his account, but also, as they say, “to go into the red.” This minus is overdraft.

Both individuals and legal entities can receive an overdraft; the only difference is the package of documents for registration.

An overdraft for an individual is a short-term non-targeted loan that the client can withdraw from his balance in excess of the positive cash balance. For a legal entity, an overdraft means a non-targeted short-term bank loan in non-cash form in case of insufficient funds for current settlements in its account.

Overdraft is a kind of helping hand for the client during a difficult financial period. During a period of unforeseen, but extremely necessary, cash expenses. At the same time, overdraft has more favorable conditions compared to other bank credit products.

What is the reason for the reduced percentage? For the bank, this type of loan poses minimal risk, because soon the user’s card will receive funds - salary, pension, various payments, so it confidently meets the client halfway and provides an overdraft. However, for such a service to be available, it must be connected to a personal bank card.

Types of overdraft

There are 5 types of overdraft:

• salary;
• classical;
• technical;
• advance;
• for collection;

Let's look at each of them.

This is a type of overdraft that is attached to the card for payment of wages. With this type of overdraft, there is no need to specify the amount of overspending and submit additional documents that indicate the purpose of the expenses.

To receive this loan you must:

• be a regular customer of this bank;
• regularly receive a salary from this bank (i.e. the employer must transfer it regularly).

Please note that if you have a salary card with an overdraft, in the event of dismissal from a permanent place of work, the overdraft is automatically turned off.

This product is distinguished by its simplicity of registration, because you do not need to waste time visiting a bank branch, applying for a loan, collecting documents, etc. This service opens automatically for salary clients.

As a rule, the overdraft limit on the card is small, and if it goes into the red, it is immediately covered by the funds received from your salary.

The overdraft amount for this type of loan is determined based on the amount of wages (limit no more than 2 monthly salaries). The interest is 15%-20% per annum. It will be accrued only for days of using the overdraft and for specifically spent funds.

• simple registration procedure;
• 100% approval of the application, subject to service by the client under the salary project program;
• low interest rate.

• It’s difficult to get out of the “minus” on the map.

You can also find another name for this overdraft - standard and involves issuing a loan within a fixed limit. These restrictions are specified in advance in the contract for the execution of certain payment orders and also compensation of costs.

To receive such a loan, you must:

• have more than one year of work experience in the primary field of activity;
• be a client of this bank during the last six months;
• have zero turnover on the account;
• cash receipts must be credited to the client’s balance at least three times a week;
• The client should not have debt obligations on the current account.

The limit for this type of lending is equal to the minimum monthly credit turnover on your borrower current account divided by 2. (L = T / 2). At the same time, the average interest rate is 14.5% per annum.

This type of overdraft is provided to the client without checking his financial condition. To carry out the calculation, the amount of funds received to the client’s balance over the last three days is multiplied by a fixed coefficient (0.95). After a certain period, the overdraft will be closed.

In order to obtain this type of loan you must:

• submit certificates from all banks in which the borrower has accounts;
• submit an application for this type of overdraft with a description of the operation being carried out, which contributes to the receipt of funds on the borrower’s balance sheet. As well as copies of contracts, payment orders and documents that confirm the receipt of funds specified in the application form.
• provide confirmation of credit turnover for the last six months;
• confirm that the client has no debts in other financial institutions;

The limit is the minimum amount of the borrower's monthly income divided by 1.5 (L = I /1.5).

The average interest rate in this case will be 15% per annum.

Distinctive features of a technical overdraft are:

• automatic debt repayment in the amount of the full amount of the client’s credit balance on the day of settlement;
• interest on this overdraft is accrued on the amount of debt, thus the client has the opportunity to even save on interest costs;
• The borrower undertakes to repay all debts in full at least once a month by adding a sum of money to the balance.

Video. Technical overdraft

This type of lending can only be obtained by a client who impeccably fulfills all the bank’s conditions and has already confirmed his integrity and has a high credit rating. In order to attract a client to settlement services, they make him a favorable loan offer.

You can get it under the same conditions as other types of overdraft. They may, of course, vary from bank to bank, but as a rule they are:

• work experience in the primary field of activity for more than one year;
• use of bank services for settlement and cash services over the past six months;
• the frequency of receipts of funds to the client’s balance is at least three times a week or at least 12 times a month;
• non-zero account turnover;
• There should be no debts or unpaid orders on this current account.

To calculate the limit for this advance overdraft, you must use the following formula L = T (a)/3. in this formula, T(a) is the minimum truncated monthly credit turnover on the client’s account without targeted payments to repay loan debts and interest payments to creditor banks.

The amount of the minimum overdraft provided by the bank is calculated based on the credit turnover on the client’s account. Employees of the financial institution take into account the largest amounts of receipts on the client’s balance sheet over the previous 3 months, except for funds that arrived on the borrower’s balance sheet from the accounts of other banks.

Then the month with minimum turnover is determined, and loan payments are taken into account, taking into account interest payments, just like in a classic overdraft. Within a month, a decision is made on cooperation with this borrower.

The average interest rate in an advance overdraft is 15.5% per annum.

Overdraft for collection

This type of loan is allocated only to borrower clients who use income at 75% of the loan turnover. This profit can be used to credit the client’s balance. The contract is valid for one year. This agreement has the possibility of extension, if desired by the client and the bank. In case of overdraft for collection, the tranche is made within 30 days.

To obtain a loan for collection, the following conditions must be met:

• The borrower's activity is at least one year;
• The borrower has uniform and regular income from all current accounts;
• Availability of regular customers (at least two);
• Guarantors are required - business owners whose shares, in total, amount to at least 50%.

The amount of the limit for such an overdraft depends directly on the number of its debtors, on the size of the borrower’s turnover, on the activity of crediting funds, as well as the type of product.

The overdraft limit for collection can be calculated using the following formula: L = I / 1.5, where L is the limit and I is the minimum monthly volume of credits to the client’s account.

The average interest rate is 14.5% per annum. With the condition that when opening a limit in this overdraft, a commission of 1% is charged.

The difference between an overdraft and a loan

Based on the above, people tend to equate two concepts such as credit and overdraft. Yes, in both cases, the client receives funds from the bank for a certain period of time and he will pay an interest rate for the money received.

But no matter how similar these banking products may seem at first glance, there are significant differences between them. Let's look at them:

Requirements for borrowers

Despite the fact that each bank establishes its own procedures for applying for an overdraft and puts forward certain conditions for clients depending on the type of loan, there is a certain list of documents without which obtaining this loan is not possible.

So, an approximate list of documents for obtaining an overdraft:

• passport;
• an additional document identifying the borrower (driver’s license, foreign passport, pension card, etc.);
• taxpayer identification number (TIN);
• document showing income for the last few months;
• credit application;
• application form (the application form is provided at the bank).

Also, special requirements for obtaining an overdraft include:

• No overdue debt to the bank;
• Having continuous work experience
• Having a main place of work;
• Permanent registration and residence in the territory served by the bank.

It should be noted that the period of continuous work experience required to obtain a loan is set by each bank individually.

Each bank reserves the right to determine the required package of documents for processing a loan product.

Among other credit products, the most popular today are plastic cards with overdraft. As a rule, they are assigned to the client’s main card account and involve receiving a quick loan within a set amount.

By offering plastic debit or salary cards with a set credit limit, banks show loyalty to their customers.

Customer loyalty is a key success factor on which the successful activities of any company are built. To attract new customers and retain existing ones, you need to be loyal to them. In other words, to create all the necessary conditions to make the consumer warm and comfortable. All kinds of services, discounts, additional bonuses and, in our case, a short-term loan - this is the very hook on which clients hang on.

The client always has a specified limit of funds on his card, which he can use at any time. This is convenient, because if necessary, you do not need to go to the bank for a loan, stand in line and fill out documents.

This service especially adds comfort during the trip. An overdraft can become that financial safety net that will allow you to feel relaxed on vacation.

As a rule, the bank sets a grace period during which interest is not charged on the used credit limit. Thus, if there are only a few days left until your payday or the expected date of receipt of money, you can safely use the loan and not lose on interest. When money arrives in the account, the funds will cover the credit minus.

Applying for a card with overdraft

When signing an agreement with a bank to issue a payment card with an overdraft function, you must understand that many banks include hidden fees in the service.

By issuing such loyal products as a payment card with an overdraft, banks set fairly strict conditions for servicing plastic. Therefore, the benefit from using such a card will only be if all the rules are strictly followed.

Before signing the contract, be sure to check with the specialist the following points:

• the amount of the credit limit on the card;
• interest rate for the use of credit funds;
• availability and duration of the grace period;
• grace period calculation scheme;
• service commission;
• commission for withdrawing money from an ATM;
• penalties for violation of the terms of the contract.

Types of overdrafts

In the banking industry, experts distinguish two types of overdrafts:

• allowed;
• unauthorized (technical);

What is an authorized overdraft? This is a loan that the client-borrower personally issued (submitted an application). And after the agreed time, the bank approved this application. In this case, the borrower legally uses the established credit. For using money with this type of overdraft, the client pays up to 20% per annum.

But when a client spends all the money from his account and goes beyond the established limit, then an unauthorized (technical) overdraft arises. In this case, the interest for using money is completely different, they vary from 50% to 60% per annum. And if this amount is not paid within a few days, the bank imposes an impressive fine.

But still, there are situations when a technical overdraft becomes possible.

The reasons for this are:

• Technical error of the bank. For example, in the event of a technical error, the same amount was credited to the client’s account twice. After the problem has been detected and corrected, the erroneously accrued funds are automatically written off, and if an overdraft occurs on the card during this period, the limit may be exceeded.
• Changes in exchange rates. This situation arises when a person makes a purchase from a ruble card in dollars, euros or any other currency. In this case, the loan is calculated at the current exchange rate. If the exchange rate changes before the client pays the debt, the loan amount may increase. Accordingly, the debt will exceed the permissible limit.
• Unconfirmed transactions. For example, a client made a purchase, and after that funds were debited for another transaction that was completed earlier. This may also result in an unauthorized overdraft.

Pros and cons of overdraft

Like any banking product, overdraft has its advantages and disadvantages.

The positive characteristics of an overdraft are as follows:

1. At any time, a bank client can borrow the money he needs within the limit.
2. It can borrow an unlimited number of times.
3. Interest is charged only on the actual overdraft amount.
4. An overdraft does not require a third party guarantee or collateral. A guarantee from the client-borrower is sufficient.
5. This type of loan, such as an overdraft, allows you to make important and necessary payments, even at the moment when the receipts to the current account stop.
6. For entrepreneurs, an overdraft allows them to avoid delays in cash flow.
7. For holders of a bank salary card, an overdraft can increase the limit amount several times.
8. The client can refuse this service at any time.
9. After the client’s spending exceeds the balance on his balance and he uses the overdraft, he will receive notifications - reminders, asking him to repay the debt.

The negative characteristics of an overdraft are as follows:

• The bank enters into an overdraft agreement for a maximum of one year. There is a need to extend or renew the contract.
• A limit is set on the maximum loan size.
• Short terms within which the debt must be repaid.
• High interest rate.
• The debt must be repaid in full, not in parts.
• Hidden fees. Such, for example, payments as commission for cashing out borrowed money at an ATM, tax on account transactions, and more.
• When concluding an overdraft agreement, you should remember that the bank has the right to increase the interest rate and demand repayment of the debt in a shorter period of time.
• A client who does not fully understand the banking system (even if this has been explained to him repeatedly and in detail) may use an overdraft without even realizing it. And, ultimately, an unpleasant surprise will await him.

Why is overdraft dangerous for individuals?

Having a credit limit on their balance, many people end up in a constant “minus”, from which it is very difficult to get out of it later. This problem is especially relevant for those clients who have a large credit limit, which the money received from their salary cannot cover at one time.

After the grace period ends, interest begins to accrue on the loan, and it becomes harder and harder for the client to repay the loan.

Having access to a certain amount of money, a person can forget about repaying the debt to the bank. This is called a technical overdraft - debt when paying funds.

If there is no need, it is better to immediately disable the overdraft service.

To do this, just contact the bank and write an application. One of the conditions for such action will be the absence of debt under this program.

Many experts call overdraft a “provoker” of debt. The realization that you can always use money on a card drives many into a debt hole from which it is not easy to get out. In the West, psychologists have long been appealing to such a concept as “credit addiction.” Feeling a certain freedom of money from such credit products, a person feels excitement and gets used to “living on debt.”

Perhaps this is the only drawback of this loan product. But with a competent approach, in all other cases overdraft demonstrates its advantages.

Conclusion

To avoid any misunderstandings, it is better to go to the bank from time to time, contact the manager, and ask for movement on your account. Compare statements with ATM receipts and don't be afraid to request a report of suspicious transactions on your statement.

And when concluding an overdraft agreement, you should always realistically assess your financial capabilities. In order for it to bring profit and benefit, you need to carefully monitor the balance on your balance sheet. It is important to spend borrowed funds, being confident that the money will arrive in your account in the required amount before the end of the grace period.

Video. What is overdraft