Dispo debts: accounts in minus

Image result for financial counseling

“Dispo” is the casual abbreviation for the disposition credit . This is granted by credit institutions in a checking account and offers a limited possibility to overdraw the account . More money will be withdrawn than is actually available on the checking account.

One of the characteristics of a disposable is that it can be used variably and without any special announcement . The credit limit is often two or three monthly salaries. The repayment of debit debts is irregular and possible in different amounts.

The resulting minus is pre-stretched by the bank. Such debit liabilities are usually associated with significant interest , which must be repaid by the account holder together with the actual debt .

Since the reimbursement of the pay packet by the cashless salary payment in the late 1950s, credit institutions generally allow the overdraft, if the credit line in reasonable relation to wages and salary .

Disadvantage of the Dispo: High lending rates

Dispo debts are not granted by a bank without corresponding consideration. Therefore, the use of a credit line is usually associated with so-called debit interest , which are calculated by the day. In addition, overdraft interest may accrue if the specified credit limit is exceeded.

The interest that accrues from existing disbursement debts is relatively high compared to other forms of interest. In 2015, they averaged 10.25 percent . However, as they are not prescribed by law, dispo interest rates fluctuate a lot.

Normally, the daily borrowing rates range from just under five percent up to 15 percent . Overdraft interest on exceeding the credit limit is often a few percentage points higher.

Termination of the disposition credit

The disposition can be terminated by the bank in most cases without notice . However, this usually requires an important reason . This can for example at

  • Deterioration of the assets of the Account Owner or
  • Initiation of foreclosure against the owner consist. The case of a termination is often particularly explosive for the account holder, because all debit debts are then due in one fell swoop .

As a rule, however, the system is used up because the account holder has to overcome a financial bottleneck . Therefore, the immediate payment of unregistered debt puts borrowers often in an emergency, also with the depending on the amount of debt personal bankruptcy may end.

Reduce disposition debt: How is this possible?

For many debtors, the Dispo is therefore a debt trap , also because it make the high interest rates more difficult to settle the liability. In order not to let that happen, this type of credit should never be used over a longer period of time , but only available for emergencies . Next month, the account balance should be back in positive territory.

But what can bank account holders do when it becomes apparent that the data collection must be used permanently or more frequently ? What should be done if there are already sizeable debit debts ?

Use savings

The interest on syndicated debts is usually higher than any interest rate on savings on other accounts , such as money market accounts. Consequently, it makes sense, if possible, to use existing cash deposits to pay off the debit .

Similarly, it may be useful to ask family or friends to pay the debit debt and owe the sum instead of the bank – without high lending rates . Anyone who sees a way to partially or completely save other expenses may also be able to compensate for smaller collection fees.

Remortgage: installment loan

Another way to reduce the disposition debt, may be a debt restructuring . Usually a installment loan is equipped with less high interest rates . In addition, there is an obligation to meet a monthly due date, which helps many debtors to pay off the loan through regular installments . In addition, the installment loan is set for a specific period of time and can not be terminated easily.

Therefore, before this step, it is important to compare monthly expenditures and revenues, and on this basis, to agree on a realistic installment amount with the creditor , which can be borne by the debtor over a longer period of time. The credit itself should not be too high . As a rule, a slightly higher loan amount is sufficient, as debit-side debts have been incurred in order to pay the first installment of the new loan.

However, debt rescheduling by installment loan requires that debtors no longer use the interdispensing loan . Otherwise, the debt rescheduling can only lead deeper into the debt trap.

Alternative: call credit

A call credit is similar to a Dispo, but is much cheaper. A bank will, upon request, provide a loan in a certain financial framework , which may be used as needed . Interest only accrues on the amount actually used. The eradication is often individually selectable. Some banks only charge interest rates monthly, others a low rate.

But even here is true : who despite debt rescheduling continues to use his Dispo and accumulates debts or agreed too high a call-off loan, the debt trap does not escape , but slips even deeper!

Help with high collection debts

If the collection debts continue to increase or insolvency occurs , debtors should seek professional help . This can be, for example, state or non-profit debt counseling . The consumer centers of the federal states can also give initial impulses and refer to suitable advice centers.

Make sure that the chosen debt counseling agency can issue certificates for the failure of an out-of-court settlement attempt according to § 305 of the Insolvency Act (InsO). Because if it should come to the private bankruptcy due to the debit debt, the insolvency proceedings can only be opened with such a certificate.

In addition to free debt counseling, a legally trained debt counselor can be useful. An insolvency lawyer is not only familiar with the requirements of debt settlement and consumer insolvency proceedings , he can also legally negotiate with creditors and banks.

Susan Allen