overdraft ....situation

palula

hey guys i just joined the site and i love it! I came on here actually as i have a problem and googling the problem is not giving me much help!

i have a large overdraft but this does not exceed my income. However i really am kinda struggling to pay it off, just because i have lots of other things going out. I think the problem is seeing it, knowing my wages could pay it off in a month but then other dd's come out etc etc. I have enough left over to make regular payments though.

Anyway i wondered what IS the best thing to do to clear it with the least impact on my financial card? I can manage to pay it back monthly but it is going to take me some time. It is the interest that is getting me. Ive looked at changing bank accounts, getting a loan, getting an balance transfer thing but unfortunately my credit score is pretty awful, from past issues.

I hope you dont mind but i dont really want to divulge figures. I just wondered what people would recommend me to do. Because leaving my bank who i think are great, would be ok but would they accept that i've just gone and will pay it back monthly? Wont that land me in hot water? And ruin my credit score?
And a loan, wont that be another credit check and a bad rate of interest?

I think there must be others in my position that can help or sympathise? I hope so!

Palula

Thanks.

Lokolo

If you end up leaving it as it is and not using the account they will more than likely remove the overdraft and demand instant repayment (or a lot of charges).

Have you thought of doing a Statement of Affairs? This will give you a guide of how much you can cut down and pay more overdraft off and get rid of it sooner.

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

If you have't do it on the link above. You can get the results in MSE format, post it on here and people will give you some ideas.

jambosans

palula wrote: »

Anyway i wondered what IS the best thing to do to clear it with the least impact on my financial card? I can manage to pay it back monthly but it is going to take me some time. It is the interest that is getting me.

I would set yourself a mental limit. For example, if you get paid say £1000 per month, try and leave at least £100 untouched. That would mean each month your overdraft would reduce by £100. It is difficult but you would have to be disciplined, ignoring your available balance, and making sure you only spend a set amount of your wages (from the example, say £900).

palula wrote: »

Ive looked at changing bank accounts, getting a loan, getting an balance transfer thing but unfortunately my credit score is pretty awful, from past issues.

A loan may be a sensible option if you plan to pay over a longer period of time. Overdraft interest rates tend to be high because they are only designed for short term borrowing. However if you live in your overdraft, you may find yourself paying more interest annually than you would on a loan. Credit score permitting I would consider it an option. Otherwise I would follow the above.

palula wrote: »

I hope you dont mind but i dont really want to divulge figures. I just wondered what people would recommend me to do. Because leaving my bank who i think are great, would be ok but would they accept that i've just gone and will pay it back monthly? Wont that land me in hot water? And ruin my credit score?

If it helped to budget, you could set-up a basic bank account, for all your payments and salary, and then setup a standing order to pay off some of your overdraft each month. This may be easier to manage than the above suggestion, but they both follow the same principle: budget some money to pay off the overdraft.

I wouldn't tell your bank that you want to arrange monthly repayments or anything like that. I've read stories where they remove overdrafts and place the account in collections, which can effect your credit rating (defaults, etc.). If you are regularly funding the account and the overdraft is reducing, then the bank should take no notice. Although I would note that overdrafts are repayable on demand, so the bank technically can remove it any point, however these decision are normally made on your annual review date.

palula wrote: »

And a loan, wont that be another credit check and a bad rate of interest?

Well if you compare interest rates you may find a loan cheaper in the long term. An overdraft is appealing short term, but as I've said, the higher annual rates (in comparison to loans), would normally mean more interest payments when used over a pro-longed period. It will involve another credit check, and if your credit is poor I would consider trying to budget instead of borrow your way out of the overdraft.

Hope this helps. On a final note, you are doing the right thing in being pro-active in wanting to pay off this debt. All too often people wise up when the debt is recalled, however if you can get a head stead, you will be better off in the long wrong.

Best of luck.

palula

Thanks - how about if i move my money to another account or another bank and get my salaray paid there and then just move money back and forward ? is that enuogh for them to see that im putting money in and then say move it back out but leave 50-100 or more a month there, immediately reducing overdraft with banK?

thatsean

Here's another two ideas.

1) See if your bank have a product to refinance your debt into a separate loan - many banks do for customers who are struggling, and as you're not borrowing more money, the criteria isn't as high as for an 'off the shelf loan' - beware, the fees on these can be high

2) Why not call your bank every payday and take £100, or whatever off your limit, that was you can't spend what you can't get at, and you can stay with the bank you lilke. Only risk here that I can see is that some banks credit check to lower an OD, i guess there's a risk that they could credit check to lower it, and then see that you've dropped out of their lending criteria alltogether. If you put which bank you're with, i'm sure a member will be along who knows that banks' procedures well.

As others have said it's great that you're dealing with this now, I know from personal experience that buring your head only leads to more stress in the long term - welcome to the site!

palula

I think im going to avoid a loan. i want to take control of the debt myself. I think i will pay off a bit every month, im sure as long as they see that i am paying something off, then they wont mind too much. it will be much worse if i just ignore it. i guess they want activity on the account dont they. i had no idea that they credit check to lower overdraft, thats crazy, surely its a good thing to lower it. maybe i should just move banks and put 50 or 100 or whatever into that account every month and leave it, so that they can take it.

will i still get charges for that? i guess if no wages goin in then im over the overdraft every month, so thats interest and a charge monthly? right?

CLAPTON

There is little or no merit in moving your main account.
Indeed if you do so they might well ask for the OD to be cleared.
Similaly reducing your OD limit each mopnth is a very very high risk activity too.
Involving the bank should be your last resort and only if you simply can't pay.
Telling a bank your are struggling is frankly bad news .. struggling people means high risk to the bank and risk risk means high APRs.

You say you don't want to give numbers..that OK but it also means that no-one can really give any detailed help either

Basically no amount of messing about with new a/cs etc is substitute for increasing your income (part time job maybe) and spending less.

go have a look at the debt free wannabe board.. people post up their full financial details there and often get very good advice about cutting down spending etc.
Even if you don't want to post you may pick up some good ideas.

vaporate

How can lowering your overdraft limit every month be bad? I guess you shouldnt if its just 100 every month, but I'm glad I did.

1250 to 750 to 500 thus far.

YorkshireBoy

vaporate wrote: »

How can lowering your overdraft limit every month be bad?

With the new 'rules' on lending coverage you're unlikely to ever get it back.

There's an increased risk of incurring charges if you slip up/have an emergency one month/etc.

A larger overdraft with much/all of it unused looks better on a credit report because it shows you're responsible with it.

You'll feel better about yourself knowing you could go and spend it but haven't!

vaporate

I understand where you're coming from.

Personally though, I'd rather get rid of the whole OD but just leave £100-150 as spare max.

I wouldnt be too bothered about not getting it back, I've had this £1250 limit for 6 years now and just lowered it 1 month ago to £500. feels good now.

palula

i agree, im not interested in getting the overdraft back. i had a high od before and then lowered it and they warned at the time i might not get it back. i was fine with that, then THEY automatically started increasing and increasing it until im in the pickle im in now, with a high od. i told them to stop increasing it which they have.

the bank themselves are aware of the od but the advisor says if im actively reducing it monthly, they will be ok with that. wish id got his name...