As the name suggests, safety-net credit loans are loans that are offered by organisations in the UK as to provide a margin of reprieve (safety net) to people who have loans and overdrafts and are about to incur unauthorised overdraft charges or penalty fees due to their inability to make timely repayments. Safety-net credit loans are especially useful since they charge interest rates that are far below the penalty fees charged. They also ensure that they only lend a feasible amount that the borrower can easily pay back.
Safety-net credit loans were developed in a response to a massive outcry and great media coverage of the way banks in the United Kingdom were exploiting customers by ensuring that the charges incurred on unauthorised overdrafts (money they did not agree to lend you that often arises due to delayed or foregone repayments) where abnormally high of an annualised percentage rate ranging from 300,00% to 800,00%. This is extremely high when compared to safety-net credit loans annualised percentage is around 68.7%. Therefore the risk of high charges is done away with when you get safety net credit loans as a cover.
So how does it work?
Well, upon application, safety net credit monitors their customer’s accounts and when the balance drops to a pre-agreed level, the unique credit facility automatically lends out safety-net credit loans to stop their customers getting unauthorised overdrafts and incurring penalty charges. The money is deposited in the customer’s account within 15 minutes. Repayments can be done manually by physical deposits or automatically by withdrawals from the customer’s account. Repayments will never be taken beyond the over draft limit.
Therefore, if you are actively considering an overdraft, choose a safety-net credit loan.