What is an overdraft?

In today's world, every legal or natural person must understand what an overdraft is. After all, this financial tool has become widespread recently.

So, an overdraft is a form of short-term credit . Of course, for a client of a commercial bank, the availability of such a service is a huge advantage, especially during a temporary shortage of funds. In life there are different situations. For example, when the settlement with the counterparty is urgent or until the salary has been left only a week, and the limit of funds has already been exhausted. Then the person is interested in what an overdraft is and how to get it.

Each bank has the right to put forward its own requirements and conditions, the observance of which is necessary to admit to such an attractive privilege. But the basic rules are as follows:

• Experience of work more than a year;
• Presence of a current settlement account, operations on which were actively conducted in the last six months (an acceptable minimum of three months);
• Within one month must be at least 12 receipts to the account;
• Absence of arrears in payment documents, presented to the bank, for example, orders or order requirements.

The employee of the bank explains in detail what an overdraft is, and fully discloses the procedure for obtaining and returning it. If you meet the above requirements, then you can proceed to collect the package of documents. An application for the provision of an appropriate service is considered mandatory. An individual needs to bring a certificate from his place of work, also check his credit history, the existence of arrears, other loans and so on.

Overdraft for legal entities is easier to obtain, the bank is more willing to enter into an agreement with them, as the profits from transactions will be higher than from loans granted to an individual. The firm transfers to the bank the financial statements, balance sheet and other documents reflecting the company's solvency.

Do not forget about what an overdraft is in the narrow sense. This is taking a certain amount of money in loans from a commercial bank. And when paying for any loan, in addition to the principal amount, interest is provided as a reward for risk. Therefore, for any pleasure you have to pay, and the debt must be returned in a timely manner. If, for any reason, the customer has delayed payment, the staff unobtrusively reminds you of the due date for payment by phone. If the delay exceeds the established time, the bank accrues a penalty.

Conditionally, an overdraft can be divided into two types:

• Allowed;
• unauthorized.

The first view speaks for itself and means that the borrower has received a prior consent to receive funds in excess of the limit. Among the allowed overdrafts, advance, technical and cash collection are allotted. The purpose of advance forms is to increase the number of target audiences of a particular bank. The technical overdraft is lending with collateral in the form of payments executed by the client. The form "for cash collection" assumes that the client independently carries out the majority of receipts.

Unauthorized appearance occurs against the will of the bank, when the borrower in one way or another receives the required amount of funds. But in this case, the risk of the client, as a lending institution usually applies a fairly strict penal system penalties.

This form of lending is beneficial for the responsible borrower, since it has significant advantages for him. For example, the level of interest rates, compared to others, is low and varies from 10% to 20%. In addition, the client gets the opportunity to almost instantly receive the necessary amount of money without additional formalities. It is worth mentioning one more important aspect: no collateral is required, but to ensure the availability of a suretyship.