Borrow money or are in the red?

Is borrowing money cheaper than being in the red at a bank? Or is overdraft cheaper than a loan? It may differ per situation, this file about borrowing and your current account credit informs you.

Being in the red is the easiest way to borrow money. When opening an account you often decide whether you want to be able to be in the red and possibly up to what amount. The interest that you have to pay for being overdrawn is settled monthly by your bank. This interest is higher than the interest you pay for a loan. The advantage of being able to stand in the red is that it is nice and easy and clear; you do not have to keep separate records for it. The downside is that it is very expensive.

Revolving credit

A revolving credit can be a good alternative. This form of borrowing offers you the opportunity to be in the red for a longer period of time. A revolving credit is often taken out for amounts from 5,000 US dollars and can go up to 75,000 US dollars. The advantages of a revolving credit are that you pay less interest than with an overdraft, that you can repay penalty-free in the meantime and therefore you can also shorten your term. The disadvantage is that you do pay more interest than with a personal loan.

Personal loan

Another cheaper alternative is to take out a personal loan . You may want to make a purchase that you are unable to pay immediately, even if you fully use your overdraft. In this case, a personal loan can be the solution. The big advantage of a personal loan is that favorable interest rates are often offered and the term is fixed. A disadvantage is that you are stuck with it for a long time and that interim repayments cannot be done without penalty.


Being in the red is the easiest solution, without extra administration, paying off penalty-free at times when you want. The disadvantage is that being in the red is very expensive. For one big purchase, a personal loan can be a good idea. You will then pay less interest than if you are overdrawn, but you will be paying off longer. If you occasionally need a lot of money over a longer period, then a revolving credit is the solution. You can then have extra money available for a number of months and repay it in installments. The interest for this is lower than for an overdraft, but higher than for a loan.

All in all, it is important to calculate properly what it will cost you (in terms of interest) and what the cheapest solution is.