Overdraft

Joshua3122

Hi

Im looking for some advice. We desparatley want to reduce our overdraft & the bank have said we should take out a loan to clear it. The loan is £2,000 over 3 years (£76 a month). We currently have a £2,000 overdraft and pay £31 a month for it. We fluxuate between £1,000 & £1,800 in the overdraft depending on the time of month - we get paid weekly so need a bit of an overdraft anyway as we never have enough in the account at the beginning or middle of the month when all the DD come off. Hubby was out of work for a few weeks last year which has put us into this situation. Ive done the budget planner & it shows we earn £104 more a month than we spend but I think we probably spend that with miscellaneous stuff like birthdays that I did not budget for as could not think of an amount.

Anyone offer any advice, whether they have been able to get out of an o/d or not? Whether taking out the loan is a good idea (we asked & can pay it back quicker if possible). I am self employed but earnings cant be counted on as fluctuate so much and although not in the red Ive no cashflow at the moment due to losing money through a company owing me money folding

My hubby can do extra work if he can get it (he is a Joiner) - would it be better to do it this way, although could take at least a year and we would never see him (kids already upset we cant spend much time with them through working all the time). Need some balance.

Thanks !

DarkConvict

OFT Debt collection guidance - http://www.oft.gov.uk/shared_oft/business_leaflets/consumer_credit/oft664.pdf

Physical/psychological harassment
2.5 Putting pressure on debtors or third parties is considered to be oppressive.
2.6 Examples of unfair practices are as follows:
b. pressurising debtors to sell property, to raise funds by further
borrowing or to extend their borrowing

They should not even be suggesting you borrow more money. A loan is inflexible compared to an overdraft. I would stay away from taking out a loan as trust me it will only encourage you to spend more money since your out the overdraft.
One thing to remember is the OD can be taken away at any time given 30 days notice, so it is best to stay out of it for that reason alone nevertheless the monthly charges.

If you are unable to do more work without destorying the family enviroment then you need to look at other means to up your income.
Benefits - http://www.entitledto.co.uk/
Up your income - http://forums.moneysavingexpert.com/forumdisplay.php?f=145
Daily clicks - search for this i don't know it well myself.

The other it to reduce outgoings.
Post up an SOA and we will suggest possible cuts - http://www.makesenseofcards.com/soacalc.html

As to your £104 spare. Start a spending diary. Record everything you buy then you can see where your budget is going wrong.

As this is just an overdraft do you have good credit rating overall, if so you might be able to do a super balance transfer to a 0% card, obviously this means you save £31 a year on overdraft interest (~£360) but do need to pay off the entire balance before the 0% ends as credit cards do cost more than overdrafts, unless of course you get another 0% deal but never count on getting 0% deals in a recession. More info on this here - http://www.moneysavingexpert.com/loans/cut-loan-overdraft-costs

theoretica

I strongly suggest that you do not get a loan if you are going to keep the overdraft. It looks to me from the numbers that you are being offered a loan at the same interest rate as your overdraft so you won't be any better off paying £76 a month off the loan than you will paying £76 off the overdraft and you will have the potential to spend into the overdraft again and get into more debt.

Either take the loan and cancel the overdraft - you do not need one just because you are paid weekly, you need a small positive balance in your account most of the time rather than zero. OR be disciplined in paying off the overdraft by at least £76 a month and if you need keeping on the straight and narrow ring up the bank regularly asking them to reduce the available overdraft.

honeybear_2

theoretica wrote: »

be disciplined in paying off the overdraft by at least £76 a month and if you need keeping on the straight and narrow ring up the bank regularly asking them to reduce the available overdraft.

I'm doing this to reduce my overdraft. It does take discipline but I can get mine reduced via online banking, which makes it easier. As soon as my pay is in there I just fire off a request so it goes down before I really notice it.

I'd strongly recommend it doing it this way & not taking out the loan.

Joshua3122

Wow thank you. We do have a good credit rating as no other debts (other than a £200 credit card debt) & have not defaulted on anything atall - ever I think!

The super transfer balance sounds perfect and I think (after I get my head round the details) thats the way to go.

Really appreciate this.

Joshua3122

Just read other replies and I like the idea of reducing the overdraft gradually too as can do this online too. I am hopefully getting some more sales this month than normal (being Fathers Day) so could pay in some money and reduce the overdraft as I pay it in and if I do this for a month then the super balance trsf can be less than £2K meaning easier to pay off. Sorry Im thinking out loud. Until 2 hours ago I felt stuck, I now feel so much better - why did I not come on here earlier!!!:T