When interest rates are low, it can be advantageous to agree a fixed interest rate. An Ordinary term loan refers to a personal loan with a variable interest rate. As interest rates change, repayments may increase or decrease. The advantage of such a loan is that there are usually no penalties for early repayment, unlike fixed interest rate loans. An overdraft facility enables current account holders to write cheques or use their debit card up to an agreed limit even with insufficient cash in the account.
Interest is charged only for the period the account is overdrawn.
Consumers should be aware that any rights to free banking are lost during the overdrawn period so this should be considered an additional cost of credit. Customers who exceed agreed limits or overdraw their accounts without permission will incur penalty charges. Overdrafts are contractually negotiated legal instruments. Typically reviewed annually, most banks require your account to be in credit for at least 30 days each year. Credit Unions Credit unions usually provide cheaper credit than any other source.