An overdraft or line of credit is called, one-sided an account holder by the account holding bank granted. The account holder does not require a contract signature. This unilateral declaration of intent by the Bank is made known either by a letter to the Account Holder or a statement on the bank statement. Thus, the customer is informed about the amount of the possible overdraft and the interest rate to be paid. By the actual account overdraft the customer accepts the unilateral declaration of intent.
Prerequisite for the granting of a disposition credit are regular payments received on the account according to the amount of which the credit institution also measures the amount of the disposition credit.
Here, banks vary between twice and three times the value of regular monthly cash receipts. With a discretionary credit, account holders have the ability to make payments and dispositions even though their accounts have no credit.
The credit institutions expect that the overdraft represents a short-term anticipation of the expected payment and will be compensated within two to three months.
Overdraft facilities are generally used in order to purchases or expenses finance , where the account holder is of the opinion that it will lead back the overdraft with its own revenue and discipline. The disposition credit does not serve as a permanent overdraft. If an account holder fails to recover his overdraft facility over an extended period of time, he should seek information online and repost the credit line into installment credit . The installment loan then requires the borrower to pay fixed monthly installments to repay the loan . Often the interest rates for a installment loan are lower than those for discretionary credit.