overdraft trouble

lee_meah

hi, i recently bought a new car. i was due some money with which i was going to buy the car. in the mean time i found a car so contacted my bank to see if there was a way of getting a short term loan, i was advised to simply increase my overdraft for a period of time until my money came through. i wasnt however advised that for the period of time i was in this overdraft that i would be charged interest, i thought this only happened if you went over your agreed limit.

my question is was i wrongly advised as surely a loan would have been a better way to go as i would only have had to pay a small amount of interest back or an early repayment charge instead of the massive charge i got on my overdraft.

is it worthwhile me taking this any further?

thanks lee

mrposhman

not really. To be fair the bank probably thought that as you already have an overdraft then you were aware what their interest payments were.

jonesMUFCforever

What was this 'massive charge'?
Did you really expect the bank to give you the use of their money for free?

Did you get a letter from your bank confirming the overdraft and the terms and conditions of use?

I agree with the bank in this case an overdraft is simpler and probably cheaper for you short term than a loan.
A loan would have an early repayment charge typically of 2 months interest, an overdraft just charges interest on the amount used.

Paul_Herring

lee_meah wrote: »

i wasnt however advised that for the period of time i was in this overdraft that i would be charged interest,

I'm sorry, but did you think overdrafts were just free loans?

my question is was i wrongly advised as surely a loan would have been a better way to go as i would only have had to pay a small amount of interest back or an early repayment charge instead of the massive charge i got on my overdraft.

For the period concerned at best the overdraft was probably the best option, at worst you probably paid just a little bit more for the overdraft.

is it worthwhile me taking this any further?

No. You will get nowhere.

bengal-stripe

All overdrafts (unless they are specifically ‘interest-free’) will charge interest on the actual money you have used. The average for an agreed overdraft is about 15% interest. That interest is calculated daily.

If you are £1000 overdrawn, that will cost you about 41 pence per day. The next day your salary comes in and your account is in credit, so no interest is due. Two days later, after your standing orders have gone out, you are £200 overdrawn,;
that will cost you 8 pence.

An agreed overdraft is by far the cheapest way to borrow money in the short term.

exel1966

lee_meah wrote: »

hi, i recently bought a new car. i was due some money with which i was going to buy the car. in the mean time i found a car so contacted my bank to see if there was a way of getting a short term loan, i was advised to simply increase my overdraft for a period of time until my money came through. i wasnt however advised that for the period of time i was in this overdraft that i would be charged interest, i thought this only happened if you went over your agreed limit.

my question is was i wrongly advised as surely a loan would have been a better way to go as i would only have had to pay a small amount of interest back or an early repayment charge instead of the massive charge i got on my overdraft.

is it worthwhile me taking this any further?

thanks lee

No, you don't have anything to take further. You've been naive in the extreme to think you were going to get the money for free.

I believe the bank have advised you correctly seeing as it was only a short-term term cashflow issue.