The first thing to think about when you hear the word “credit” is a classic installment loan. So, fill out the trip to the bank or fill out an online form, submit evidence, ideally get a promise, and from now on repay the monthly agreed rate including interest to the bank. But in some cases the classic is not the best option … See econgroupinc.net
What is a credit line
Framework credit, as the word suggests, contains a sum, mostly in the range between $ 5,000 and $ 25,000, and is a kind of mixture between a classic framework credit and overdraft facility.
You apply for it at a bank (not necessarily a house bank) and get it paid out relatively quickly if you make a commitment.
One advantage over an installment loan is the flexibility and monthly payments. With an installment loan, you repay the agreed rate and interest monthly. Even if, for example, you borrowed $ 25,000 and actually only needed $ 20,000, you regularly pay both the installments and the interest for the total amount. This is not the case with a credit line. With a credit line, you only regularly pay back the interest for the amount used and not for the total amount. So if you got $ 25,000 as a credit line and only used $ 20,000 of it, you only pay the interest for the $ 20,000 a month.
And what about the loan amount itself? As a rule, you do not get a specific deadline for repayment from the credit line. So, you don’t have this pressure, like with the installment loan. The credit line is almost endless because it is invested permanently. Only the interest has to be paid. Some banks want to have 1-2% of the sum in compensation, but this is the exception rather than the rule.
Framework credit vs. overdraft facility
Of course, framework credit is reminiscent of an overdraft facility, and at first glance you see no differences. Both here and there you have to pay interest for the amount used. But there are differences. First, a credit line is two to three times the monthly income, which is on average much lower than a credit line. Second, the interest rate on a overdraft facility is much higher – in some banks it is twice the interest rate on a credit line.
Why choose a credit line
A framework loan has many decisive advantages, so this alternative financing option should be aware of when considering a loan in general. Framework credit is very flexible when it comes to repayment. Because you only have to pay the interest monthly – and only if you use the sum. Framework credit can be optimally used as a reserve – you can have the sum, as it were, just in case, but not immediately, and without use there is no payment to the bank.
A framework credit can also be used for merging smaller loans. This improves creditworthiness, because a larger loan is rated better by Schufa than many smaller ones.
Conclusion: Framework credit is a mix between installment credit and overdraft facility, and has many advantages. While with the installment loan you have to pay a fixed contribution plus interest monthly, you only pay back the fixed interest with the framework loan. At the overdraft facility, you have a framework that is significantly less than a framework credit. Furthermore, the interest rates at overdraft facilities are usually twice as high as with a framework loan, which makes the framework loan more attractive.