Can you still get a mortgage if you are regularly in the red? Is being in the red actually registered with BKR? And from what amount do you have to deal with a registration? We take you through everything you need to know about the relationship between being in the red and the BKR. So you'll understand exactly when you get registered, how it affects future loans and how to avoid any problems.
Free consultationBeing in the red BKR: how does it affect your financial future?
What is being in the red and when do you get a BKR registration?
Being in the red simply means that you spend more money than is in your checking account. You then have a negative balance. Many banks offer the option of being in the red, often up to a certain maximum. This overdraft facility is actually a form of credit.
Since 2016 there are stricter rules for BKR registration when you are in the red. Previously the limit was 500 euros, but nowadays you are already registered with BKR if:
- You have a overdraft facility of more than 250 euros
- The term of this facility exceeds one month
It is important to understand that it is not the actual being in the red that is registered, but the ability to be in the red. If you have a credit facility of 1000 euros, but never use it, you are still registered with the BKR for the full amount of 1000 euros.
"Many people are surprised when they hear that even an unused overdraft facility can affect their borrowing capacity. A 1,000-euro facility can just mean 5,000 euros less mortgage options, even if you never use it."
Deepak - Legal Specialist
Registration with the BKR is neutral in itself and need not be a problem. It only becomes a negative registration if you:
- Be three months or more in arrears
- Exceeds the limit of your overdraft facility by more than 10% for an extended period of time
This negative registration is recorded with a special code (coding) at the BKR and remains there for five years, even after you pay off the debt.
Difference between different banks on overdrafts
Banks have different terms and conditions for their overdraft facilities. This can greatly affect whether and how you are registered with the BKR.
Some banks offer the possibility to be in the red up to 100 euros without being registered with BKR, because this remains below the registration limit of 250 euros. Other banks have as a minimum limit for a red-stand facility 500 euros, so you will automatically be registered.
The maximums for being in the red also vary widely. Some banks have a general maximum, while others look at your income. The maximum can be up to a full month's salary.
An important difference is also in the repayment terms. Some banks require you to have a positive balance for at least one day every month, while others require you to be at zero every three months. These conditions help determine whether you get a negative BKR registration.
Interest rates for red loans are typically between 9% and 14%. This is considerably higher than many other loan types such as personal loans. Therefore, being structurally in the red can be very costly.
Effects of being in the red on your mortgage and other loans
A overdraft facility directly affects your maximum borrowing capacity when applying for a mortgage or other loans. This is because lenders look at your total financial obligations.
When you apply for a mortgage, your BKR records are looked at. Here, the full credit limit of your overdraft facility counts, not how much you are actually in the red. For every 1,000 euros of credit limit you can get about 5,000 euros less mortgage.
Suppose you have a 2,500-euro overdraft facility, this could mean that you can get up to 12,500 euros less in mortgage. That could mean the difference between being able to buy your dream home or not.
Even for other loans such as a personal loan or car loan, a overdraft facility has an impact. Lenders calculate your maximum borrowing capacity based on your income minus your monthly charges. This involves calculating a standard monthly charge for your overdraft facility, even if you don't use it.
A negative BKR registration due to problems with being in the red has even greater consequences. With an arrears code (such as an A code), in many cases you can no longer take out a mortgage or other loans at all for a period of five years.
In addition to direct financial consequences, a BKR registration also affect renting a home, taking out a phone subscription or opening a new bank account.
Free consultationHow do you avoid problems with being in the red?
If you know you will soon be applying for a mortgage or other loan, it is wise to take a critical look at your overdraft facility. There are several steps you can take to avoid problems.
- The most effective measure is to completely cancel your overdraft facility several months before you apply for a mortgage or loan. Be sure to do this well in advance, as the registration does not immediately disappear from the BKR system.
- If cancellation is not an option, consider lowering the limit below 250 euros. This will eliminate the BKR registration requirement. Note that some banks may not offer a lower limit than 500 euros.
- If you already have a negative registration due to late payments, it is important to settle your debts as soon as possible. However, the negative registration will remain for five years, even after you have paid everything off. In some cases, it is possible to have a disproportionate or disproportionate registration removed through legal means.
- It is also wise to check your BKR registration regularly. This way you can check that all information is correct and that there are no unjustified registrations in your name. You can do this by checking your registration at the BKR.
Our specialists
Frequently asked questions about being in the red and BKR
How much are you allowed to be in the red without BKR?
Is being in the red negative BKR?
Does being in the red affect mortgage?
Does being in the red affect personal loans?
Are you stuck because of a BKR registration caused by problems with being in the red? At Dynamite Netherlands, we understand that everyone can get into financial trouble from time to time. Our legal specialists will be happy to help you see what the options are in your specific situation. Contact us today contact us for a no-obligation consultation.
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