Whats the best way around my overdraft?

sarahc1986

Hello,

Been reading through the site and was hoping someone out there may be able to help me. I'm nearly 22 and have a car on HP as I occassionally need to travel long distances for work. Everything was fine until I hit an unexpected bill earlier this year and increased my overdraft limit to £450. I'd love not to have an overdraft as everytime i'm paid it seems that a large portion of my wages are being eaten up.

I'm currently with HSBC and was wondering if I cancel my overdraft does this mean my wages will go in the balance will be cleared and i'll be £450 short or does it become like any general debt? I constanyl feel like i'm robbing peter to pay paul. I can comfortably manage all my repayments and have never defaulted and was wondering whats the best way ie changing banks then would it become a debt owed? Transferring to a credit card? Or just closing it down?

Any help/advice is greatly appreciated

MyLastFiver

if I cancel my overdraft does this mean my wages will go in the balance will be cleared and i'll be £450 short
yes.

If you don't want an overdraft but can;t afford to pay it back in one go, just pay a bit every month, reducing your overdraft limit by that amount each month, so you're not tempted to eat into it again.

If you open another bank account and have your wages paid into that, then your original overdraft will continue to accrue interest until the balance exceeds the limit, then HSBC will treat it like any other debt and you will need to offer them repayment proposals.

However, I have experience of HSBC collections and they are cretins. What they did with me was to increase my O/D limit to get it "back into order" and off their delinquency books.

I always say that your credit rating is not as important as some people think, but it would be a shame to mess it up for the sake of a £450 overdraft with extremely flexible payment terms.

Just pay it off a bit each month - whatever you can afford.

American_Dreamer_2

Hi Sarah

Tbh, You probally aren't paying a lot of interest on a £450 OD. Are you in a position to maybe reduce it by £50 - £100 a month and then come March - April 2009 it will be cleared?

doodledo_2

If I was you I would just reduce it a little each month. So ring them up each month and reduce your overdraft by £50 or £100.

Live a little more frugally each month, sell some bits on Ebay and before you know it you will be back in the black.

Good luck.

CLAPTON

I'm afraid you really need to learn how to budget and to learn to live within your means.
try this budget planner
http://www.makesenseofcards.com/soacalc.html

learn to save up for things you want and only spend what you have saved.
Buying a car on HP (presumably quite expensive and on a high APR) was most unwise.. there are loads of good reliable cars going for a couple of grand.
'Unexpected' bills are a normal part of life which is why you need to establish some savings so these unexpected things can be paid for without going into debt.

Consider ways of increasing your income.. overtime or parttime job and look at ways of reducing your spending.

sarahc1986

Thanks for the answers so far.

I was comfortably living within my means until I was hit with this unexpected bill which I used any remaining savings and my overdraft for. I unfortunatley had to use the vast majority of any savings I had earlier last year when I was out of work for 4 months in order to support myself and make sure I didn't default or miss any payments.

I've cancelled everything I don't need ie gym membership and contact lense subscription. I know how much I get each month and were it goes and when so I know how much I have remaining. I don't go extravogant I only buy essential things I need. I haven't been to the hairdressers since June, don't smoke and go out once a month if i'm lucky spending £10-15 max.

The main reason my vehicle is on HP is at the time due to having no credit rating I was turned down by my own bank and a few other high street lenders for a personal loan. My payments aren't excessive compared to some people I know who are paying over the £200 mark for something worth less than mine and to be fair i'd be in a much worse position as I had a major problem last year that was covered by warranty due to the age.

At the moment I work 5-7 days a week depending on the shift pattern. I did have a part time job up until November last year however they said I wasn't commited enough due to my full time job and I was no longer offered any hours.

I'm going to gradually try and reduce my overdraft providing they aren't going to keep charging me for it.

Thanks

partickz

sarahc1986 wrote: »

Thanks for the answers so far.

I was comfortably living within my means until I was hit with this unexpected bill which I used any remaining savings and my overdraft for. I unfortunatley had to use the vast majority of any savings I had earlier last year when I was out of work for 4 months in order to support myself and make sure I didn't default or miss any payments.

I've cancelled everything I don't need ie gym membership and contact lense subscription. I know how much I get each month and were it goes and when so I know how much I have remaining. I don't go extravogant I only buy essential things I need. I haven't been to the hairdressers since June, don't smoke and go out once a month if i'm lucky spending £10-15 max.

The main reason my vehicle is on HP is at the time due to having no credit rating I was turned down by my own bank and a few other high street lenders for a personal loan. My payments aren't excessive compared to some people I know who are paying over the £200 mark for something worth less than mine and to be fair i'd be in a much worse position as I had a major problem last year that was covered by warranty due to the age.

At the moment I work 5-7 days a week depending on the shift pattern. I did have a part time job up until November last year however they said I wasn't commited enough due to my full time job and I was no longer offered any hours.

I'm going to gradually try and reduce my overdraft providing they aren't going to keep charging me for it.

Thanks

You appear to be doing everything right then. Only other suggestions-
1. See if you can reduce your grocery spend.
2. Make sure all your utilities are the most competitive. (use a cash-back site if you see a need to change)
3. Try and sell some stuff.

Good luck

doodledo_2

Sounds like you are definately on the right track then.

It may be beneficial to post your SOA up on the board. This is a list of all your incomings/outgoings etc. Some of the people on here have such good advice and may be able to shave a few quid off your outgoings. I have attached the link to an SOA you can use and then copy and paste on to here if you're interested.

http://www.makesenseofcards.com/soacalc.html

MyLastFiver

have a car on HP as I occassionally need to travel long distances for work.

1. You don't need an expensive car to travel occasional long distances.
2. If work require you to travel then they should provide the means.

I've written this before on another thread but it saddens me to see young people saddling themselves with cars they can't afford. All that money you're paying out to the HP company - you could be out having a good time, or saving for a house, or whatever. When you're old and grey you won't remember any of the cars you've owned - you'll remember the great times you've had.

I'm 32, own my own house and earn twice the national average salary. I could afford a BMW or whatever but I drive a £1000 car, which I paid for in cash, is perfectly reliable and has taken me and the family all over Europe. It's not "cool", but neither is saddling yourself with a finance contract you can't afford. Look at the sacrifices you're making just to pay for your car - you say you don't go out, you've cancelled the gym, etc.

The British have a weird attitude to cars; they're a status symbol, even if you've had to go into debt to afford it. Go to France - hardly anyone has expensive, new cars; most ordinary people drive round in 5-10 year-old Peugeots, Fords or whatever. The French know that actually living your life is more important than having an expensive car.

Rant over. Sorry.

Paulgonnabedebtfree

MyLastFiver wrote: »

have a car on HP as I occassionally need to travel long distances for work.

1. You don't need an expensive car to travel occasional long distances.
2. If work require you to travel then they should provide the means.

I've written this before on another thread but it saddens me to see young people saddling themselves with cars they can't afford. All that money you're paying out to the HP company - you could be out having a good time, or saving for a house, or whatever. When you're old and grey you won't remember any of the cars you've owned - you'll remember the great times you've had.

I'm 32, own my own house and earn twice the national average salary. I could afford a BMW or whatever but I drive a £1000 car, which I paid for in cash, is perfectly reliable and has taken me and the family all over Europe. It's not "cool", but neither is saddling yourself with a finance contract you can't afford. Look at the sacrifices you're making just to pay for your car - you say you don't go out, you've cancelled the gym, etc.

The British have a weird attitude to cars; they're a status symbol, even if you've had to go into debt to afford it. Go to France - hardly anyone has expensive, new cars; most ordinary people drive round in 5-10 year-old Peugeots, Fords or whatever. The French know that actually living your life is more important than having an expensive car.

Rant over. Sorry.

I suppose having an expensive car over there would be a bit risky anyway as they seem to use them for blocking motorways. No car looks pretty after the government has attempted to bulldoze it out of the way

sarahc1986

I wasn't going to rant but:

1) My car isn't OTT its a basic model thats 2 and a half years old cheap to run and insure and doesn't use alot of fuel. Its not been modded like most young peoples cars
2) My previous car was a 1994 Fiesta which was uneconomical and very unreliable called the RAC out 5 times in 15 months
3) My hobby means I travel round the country in order to compete so if I break down my chances of competing are null.
4) I do have a social life and as the vast majority of my friends are students we don't spend alot but still have a great time.
5) I haven't cancelled my gym membership and contact lense subscriptions to pay for my car i've cancelled them as I don't believe in paying for a service your not using. I suffer from a condition meaning my eyes are extremely dry and just don't have the time to goto the gym working 8-10 hours a day 5-7 days a week

HP isn't ideal I will agree but I needed a car and didn't have the cash ready and available. My friends paying over £200 a month for her car which is older than mine and nothing special, she has been told its excessive but refuses to listen. My HP payment could go towards saving for a house or something else but at the end of the day no car = reliance on public transport, no social life as I couldn't get to my hobby. My HP comes to an end in just under 18 months meaning that I will have a car thats mine and will probably be with me for a very long time as I don't believe in swapping cars every 3 years

Sorry just wanted the full facts to be known as it was only overdraft advice I needed lol