A money reserve serves as a financial buffer to absorb unforeseen expenses. A money reserve or revolving credit is a relatively expensive way of borrowing, but you only pay interest on the capital you absorb.
Research has already shown that part of the population is not foreseen for unforeseen expenses and has to borrow for this. The savings behavior is – unlike many messages – not always top-notch. Many families do not soon save up and have to borrow money to cope with unforeseen expenses.
A money reserve
The money reserve or revolving credit is a flexible way to borrow money. As soon as a money reserve is granted, it is in principle unlimited in time. In other words, you can reuse repaid amounts to finance a cost.
In other words, a money reserve is a credit where you always have money behind you. The advantage is therefore extremely simple: you can finance costs that you know they can come up with, but do not know how much they are going to be: a repair of the car, a broken fridge, …
Compare money reserves
Interest rates are always informative and temporary, so they can undergo change and / or depend on the loan amount.
Representative example : Credit opening indefinite duration of 2,000 euros, annual percentage rate (APR) of 9.50% (variable annual debit interest: 9.50%) + possible costs card (fixed price or% of the outstanding balance). Request an exact calculation from one of the above parties.
Comparing money reserves is important , since a revolving credit is not a cheap way of borrowing, so that a small percentage can certainly make all the difference. By thoroughly comparing different credit providers you are able to find the most cheap money reserve.
The APR indicates the total cost of the credit. It is therefore the most important factor when comparing money reserves because you can immediately estimate the total cost of a credit opening.
If you are allocated a money reserve, a credit opening will take place. This also means that the banks will first obtain information from the National Bank of Belgium and will check your creditworthiness. This also means that you can end up on the so-called ‘blacklist’ if you are unable to repay the credit.
Depending on the amount of the money reserve, it is legally stipulated that you have to repay the credit in full within a certain period. This is called the reset period . A credit opening above 3,000 euros must be zero at least once every five years. With credit openings up to a maximum of 1,000 euros, this must be reset to zero once a year. You must take these periods into account because you have to pay off your credit at a certain moment.
Types of money reserves
A money reserve comes in many forms. In the first place there are the money reserves that can be applied for, without being linked to another account. A cash credit, where you can go below zero on your current account, is also a kind of money reserve that you can use if necessary.
You can also enter a money reserve where you receive a credit card that you can use to make payments. Unlike a classic credit card , the refund does not have to be made immediately, but the repayment can be spread over several months.
Those who apply for a classic credit card will also open a credit line. The only difference with a money reserve or revolving credit is that the repayment takes place once a month with a deduction of the amount on a linked current account. As a result, you pay no interest, but you have to take into account the costs of keeping the card.
Also cards from retail chains are similar to a classic credit card: a credit card is also opened and, in case of non-payment, you can also get a notification on the list of the National Bank of Belgium. This can be detrimental to loans that you want to apply for in the future. Read more about credit cards from retail chains .
Use money reserve
Since a revolving credit is an expensive way of borrowing, you should use it to finance an unforeseen expense that you know can be repaid within a few months.
Always check that there is no cheaper alternative to finance a specific expense:
- Loan digital devices : for buying a camera, computer, laptop, smartphone, …
- Loan on installments : for other personal expenses
- Car loan : for buying a new or second-hand car
All these lending formulas will be cheaper than a money reserve. On the other hand, it is true that they are not equally flexible: you pay back in fixed disks and once the loan has been paid off, it is also taken out.
Overview features money reserves
A money reserve is unlimited in time: once granted, you can in principle make use of it for life. Sometimes a minimum amount is required as a refund, but in general you decide how much you will be reimbursed. Repaid amounts can be taken up again afterwards.
You will only pay interest on the amount you withdraw. Who does not use his money reserve will in other words pay no interest.
Flexibility, simplicity and ease of use are the words used to describe a money reserve or revolving credit. On the other hand, there is an expensive APR which makes a money reserve the best used if it can actually be repaid within a relatively short period.