A small, increasing debt - best plan?

Salad_2 · 18 June 2004 at 5:52PM

Hi.

I have a free graduate overdraft of about £1,250 which is ending this month.

For the next three months I anticipate my debt increasing by £20-£40 each week, as I am doing some unpaid work experience and my part time job does not cover the bills. This will lead to a total additional debt of £240-£480.

I was going to move the overdraft to an interest free credit card offer. What will be the best and cheapest way to handle the weekly overspend?

nh · 18 June 2004 at 6:48PM

You could get a credit card that is 0% for BTs and purchases and use that to pay off the overdraft and spend on while you are doing your work experience. Then transfer to another 0% card after six months (when I assume you will start being paid properly) and budget to get the entire balance (£1,730 at worst) paid off before the 0% period ends, or transfer to another card.

The Lloyds current account offers an interest-free overdraft and they promise to match your current overdraft, but you may have to earn a certain amount before you can open one (pay in a certain amount every month). But they may be worth a try.

But you have to make sure you control your spending, and that you will be able to pay it back eventually or it could spiral.

Is there any way you can spend less overall, not just on the work experience but on other areas? Are you sure you know what you are spending each month. Make an income/outgoings list and budget for everything and don't go over the budget in each area (eg. if you calculate you can afford £20 on going out, DON'T spend more than that as your debt will increase further). Do you make your own lunch? You can save money there. Do you live alone or with parents, you might be able to save on supermarket shopping with a bit of effort if you live alone. Don't just accept you will go further into debt, only do that if it is REALLY necessary and will pay off in the long-term. Get Martin's book The Money Diet for ways to save money in all areas of your life, you just might not need to go further into debt.

Will the work experience pay off in the end? I am just being nosey...

Tim_L · 20 June 2004 at 12:43PM

You may find it tricky to get a 0% deal when you working voluntarily with a part time job, since you will have difficulty in meeting the minimum income thresholds.

I think at this lowish level of debt - assuming you're being sensible about spending - what you need is a plan to move from unpaid to paid employment as soon as you can, and to find the best overdraft deal you can (possibly with a couple of banks so you can use a couple of overdraft buffer zones). If you have a serious and sensible plan for moving into employment, why not see if you can get your parents to cover the debt short term if they have the money - perhaps with some arrangement for regular repayments?

In fact it's not all that difficult to save £10-20 a week out of spending by being frugal, which is half the amount you think you'll be increasing your debt by. The 'old time' moneysaving board has some good tips for living on less - this usually involves buying cheaper food and making more of it. Another good tip is to collect grocery vouchers and use them to pay for part of your shopping (as a rule, particularly in Asda and Tesco, you don't need to buy the actual product providing you're sensible about the quantity you try to get through, and I routinely put £10 worth through a week). You can get these from freebie offers and so on - there's a dial in promo for a Glade product that gives £3 vouchers a time with no apparent limit on the number of times you can apply - see the freebies board.

Also dumping a mobile contract can save a good deal of money - anyone over 40 lived most of their lives without one of these! But PAYG is a decent compromise so that people can contact you - call out using a landline and something like 18866 (see phones board) or a phone card.

Generally unpaid work experience is a great positive - it will play well on your CV when looking for similar work that you have been prepared to make sacrifices to pursue that line of activity. Do watch that you're not being used as unpaid slave labour though - if you have value to whoever you are working for then don't be shy of pointing this out.

eleanor_3 · 23 June 2004 at 8:22PM

Tim's absolutely right about not giving them 'something for nothing' - see if the company you'll be working for will pay your transport costs to and from work. Ask them for the price of a monthly Bus or Tube pass or figure the cost of petrol, parking etc. (depending on where you are). Come up with an exact figure and state your case - it's really a very reasonable request, bound to be under £100 a month - not much for them, a lifesaver for you.

I'd be very surprised if they haven't got a small fund to reimburse this necessary expense for people working for free, but most companies won't volunteer to extend it to you - you have to ask for it. If you put it to them the right way, it shows initiative! Good luck!

Salad_2 · 24 June 2004 at 11:06PM

Tx. I am getting travel and £3.50 dinner money on the days I work, so that's all good.

I am on the economy beans and rice diet as it is, so I think my estimate of debt is quite realistic.

I have been rejected for a credit card due to income.
I'm a bit stuck now, as I don't have £1000 a month coming in to open more bank accounts.

Any ideas :-/?

Salad_2 · 24 June 2004 at 11:35PM

Oh yeh, the work experience is quite unique otherwise I would do it another time..

eleanor_3 · 29 June 2004 at 3:06PM

Have you spoken with your current bank about your situation? Some banks will extend your graduate interest-free overdraft for a short period -- it'll sound good to them if you can make the case that your work experience is to benefit your future career.

Speak to your bank manager in person if you can, and present the case that your volunteer work is a temporary experience working in a field where you eventually expect to be making money. If they're smart they'll want to keep you as a customer and a three to six months' extension of your interest free overdraft isn't going to cost them much. If they seem sympathetic, go ahead and ask for another few hundred pounds' worth of overdraft interest-free.

Do talk to them as an established customer (your bargaining chip) before you start trying to borrow elsewhere.

A small, increasing debt - best plan?

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