Overdraft Help

kerri_gt

Firstly, apologies if this is answered somewhere else in the depths of MSE threads but I need some advise.

I have (well my husband has) a £5k overdraft that needs to be cleared. Its with Halifax which means with thier new charges it's costing £2 a day because it's over £2.5k. That's £60 a month at least!

Can anyone advise what the best way to pay this off is? We are trying to chip away at it between us but its so disheartening when you see £60 a month being taken.

jambosans

Save or borrow.

With that amount, if you can't save, then I would consider a loan. As you're an existing customer with Halifax you may qualify for a preferential interest rate on a loan.

Example: £7000 (minimum to qualify for typical rate of 9.9% APR) over three years would cost £227.88 per month, however interest would be halved to £33.42 per month.

Three years may seem like a long time but you have to be realistic about the overdraft, can you manage to pay it off sooner? A loan would give you a fixed monthly payment, without the worry of the overdraft being withdraw. Plus in the example I've given, the loan would come with a three month repayment holiday before starting.

Have a look below for further details:-
http://www.halifax.co.uk/loans/personalloanshome.asp

Obviously if you opt for a loan, don't settle for the Halifax, shop around, but you may find the preferential rate hard to beat because you're existing business. Credit rating permitting however you may get a better deal elsewhere. Have a wee look below for a comparison on loan rates (there are other sites out there, Moneysupermarket.com is just the first that came to mind):-
http://www.moneysupermarket.com/loans/

opinions4u

kerri_gt wrote: »

I have (well my husband has) a £5k overdraft that needs to be cleared. Its with Halifax which means with thier new charges it's costing £2 a day because it's over £2.5k. That's £60 a month at least!

On that sort of amount, the £2 a day charge is probably cheaper than the old interest charges.

Is the account funded with £1,000+ a month? If so, make sure it's changed to a Reward account to ensure that you get £5 a month back straight away.

Can anyone advise what the best way to pay this off is?

Spend less than you earn. A lot less. Easy to say, but I'd suggest you post on the Debt-free Wannabe section of the forum for some more practical assistance.

Here's a few cash savers:

- take a sandwich to work instead of buying one.
- take the kids off school dinners and put them on to a basic packed lunch of sandwich, orange juice carton, yoghurt and apple - that's £1 a day saved per child!
- car share to save on fuel.
- walk any journey under a mile to save fuel.
- know where the cheapest petrol station is locally.
- have an eBay clear out.
- give up one luxury each month (e.g. dessert, wine etc) and rotate it so you still have some nice things in life.
- go to bed half an hour early to save on electricity (and enjoy each other's company ).
- don't leave the telly on standby
- don't leave the tap running when brushing your teeth
- miss a weekly supermarket shop and use up the left overs in the cupboard/fridge.
- have a beans on toast tea once a week.

We are trying to chip away at it between us but its so disheartening when you see £60 a month being taken.

Set yourself an achieveable goal for each month and stick rigidly to it.

For example, aim for £4,900 at the end of March after charges have been added. £4,800 at the end of April and so on. If you can really afford to, go for £250 a month drops.

I'm always cautious about suggesting changing to another line of credit - people often do this and then end up building up the old line again too (e.g. you could take out a £5k loan and repay the overdraft, but if you haven't addressed the spending issues you will soon have a loan debt and a new overdraft debt).

Good luck.

jambosans

opinions4u wrote: »

Here's a few cash savers:

Thanks for covering off the one liner - "save" - part of my post.

opinions4u wrote: »

I'm always cautious about suggesting changing to another line of credit - people often do this and then end up building up the old line again too (e.g. you could take out a £5k loan and repay the overdraft, but if you haven't addressed the spending issues you will soon have a loan debt and a new overdraft debt).

Very good advice and I agree completely, if there's an underlying budgeting issue, more credit isn't going to solve it. I sometimes assume too quickly that people will be pragmatic with their debts, instead of thinking £5k loan and £5k overdraft (OP, to be clear, I'm not implying you see lines of credit in this manner).

opinions4u

jambosans wrote: »

Very good advice and I agree completely, if there's an underlying budgeting issue, more credit isn't going to solve it. I sometimes assume too quickly that people will be pragmatic with their debts, instead of thinking £5k loan and £5k overdraft (OP, to be clear, I'm not implying you see lines of credit in this manner).

As you suggest, it totally depends on the individual concerned.

If you've got a grip on the spending, and have genuinely changed the pattern that got you the debt in the first place, then juggling the debt to lower rates/payments makes absolute sense.

But if you haven't, double trouble is going to hit ya!

chambta

opinions4u wrote: »

As you suggest, it totally depends on the individual concerned.

If you've got a grip on the spending, and have genuinely changed the pattern that got you the debt in the first place, then juggling the debt to lower rates/payments makes absolute sense.

But if you haven't, double trouble is going to hit ya!

Bang on.

Why do people not understand this though?

I often ask customers why a loan to repay this, or an overdraft to repay the other will actually help them and I think I've only been given two or three sensible answers in ten years.

Thinking about it they may be the same people who admitted to overspending and being reckless!