Best way to pay off overdraft?

hohum

Apologies if I have this in the wrong section, did a search and couldn't find the answer to my specific question which is this:

I have and use the full extent of a £1920.00 overdraft with Natwest. This was a graduate overdraft, I cleared some off and then when doing postgraduate studies went into it again. I pay between £22 - £28 in interest a month.

I am now in a position to start paying back the overdraft. I think I can afford to pay back about £35/month (according to my figs into budget planner).

Earlier last year I was unemployed and getting hit with bank charges. The bank agreed a repayment plan with me of £20.00/ month for 6 months. This was perfect. However now I am not in 'special measures' the bank won't do a similar plan - apparently if I want to do an overdraft I would have to do a credit scored re-application each time? They are of course pushing a loan at me. The problem is I have absolutely no desire to take out any more financial products with Natwest. I don't have a very positive view of them...to put it politely. The fact that they tried to sell me a loan when my income was less than £7k, trying to dress it up as 'financial advice' rather left a bad impression with me. Oh and that a few years before that I was really heavily sold PPI when considering taking out a loan - to the extent of saying if I didn't take it out I wouldn't get the loan (I decided not to take one out anyway). Oh and selling me a credit card when I was student for 'just in case'. Really, really, don't trust them!

I would like to pay off the overdraft so I can not bank with them anymore. It's possible that my extreme distrust of any product they try to sell me is blinding me to the best option to pay the damned thing off? The other option of course is to save the money in another account, and pay off in chunks. Any advice?

Tixy

Could you open a new current account with another bank (one without an overdraft) and move all your income/dds across to that account. Then you could set up a standing order to repay £35 each month and in addition pay across any extra as and when you can afford it (might need to chop up your old bank card though so you are not tempted to spend again!)

getmore4less

Lets see the SOA so a plan can be formed.

hohum

Tixy - I have a feeling that if I stop paying in to the account Natwest might soon call in my overdraft, which I would not be able to pay in one lump sum? Not something I'm keen to risk.

Getmore4less: SOA is statement of account, right? Different to the budget tool? Any templates I should use?

hohum

Right, found the SOA. Clearly I am being massively optimistic in my figures, appreciate any input as to expenditure I might be missing. Because apparently according to this I have much more than £35 to put towards repayments!

Statement of Affairs and Personal Balance Sheet

Household Information
Number of adults in household........... 2
Number of children in household.........
Number of cars owned.................... 1

Monthly Income Details
Monthly income after tax................ 942
Partners monthly income after tax....... 0
Benefits................................ 0
Other income............................ 0
Total monthly income.................... 942

Monthly Expense Details
Mortgage................................ 0
Secured/HP loan repayments.............. 0
Rent.................................... 250
Management charge (leasehold property).. 0
Council tax............................. 57
Electricity............................. 40
Gas..................................... 0
Oil..................................... 0
Water rates............................. 13
Telephone (land line)................... 6
Mobile phone............................ 35
TV Licence.............................. 6.5
Satellite/Cable TV...................... 7
Internet Services....................... 10
Groceries etc. ......................... 60
Clothing................................ 20
Petrol/diesel........................... 0
Road tax................................ 0
Car Insurance........................... 20
Car maintenance (including MOT)......... 0
Car parking............................. 0
Other travel............................ 40
Childcare/nursery....................... 0
Other child related expenses............ 0
Medical (prescriptions, dentist etc).... 13
Pet insurance/vet bills................. 0
Buildings insurance..................... 0
Contents insurance...................... 0
Life assurance ......................... 0
Other insurance......................... 0
Presents (birthday, christmas etc)...... 20
Haircuts................................ 5
Entertainment........................... 40
Holiday................................. 10
Emergency fund.......................... 20
Total monthly expenses.................. 672.5


Assets
Cash.................................... 0
House value (Gross)..................... 0
Shares and bonds........................ 0
Car(s).................................. 0
Other assets............................ 0
Total Assets............................ 0

No Secured nor Hire Purchase Debts

Unsecured Debts
Description....................Debt......Monthly...APR
Natwest overdraft..............1920......0.........17
Student loan approx............14000.....0.........0
Total unsecured debts..........15920.....0.........-


Monthly Budget Summary
Total monthly income.................... 942
Expenses (including HP & secured debts). 672.5
Available for debt repayments........... 269.5
Monthly UNsecured debt repayments....... 0
Amount left after debt repayments....... 269.5

Personal Balance Sheet Summary
Total assets (things you own)........... 0
Total HP & Secured debt................. -0
Total Unsecured debt.................... -15,920
Net Assets.............................. -15,920

Created using the SOA calculator at makesenseofcards
Reproduced on Moneysavingexpert with permission, using Firefox browser.

husemin

Hi, I agree, if you stop using your bank they could call the OD in and ask for it all back, also if you dont keep an income to the bank of between £500 - £1000 or £1500 a month they may charge you for banking services.

You could get a credit card and do your spending on that instead of using the money in your bank, so that way you dont have to pay the credit card back for a month, at that point you would of been payed (wages) again putting you in positive balance with your bank, its the basic step of stoozing (guide is on this website).

H

hohum

Ooo crikey husemin that sounds a bit sophisticated... as you might tell I am a bit Luddite with my approach to finance.

I also don't have a great credit rating so I don't know how that would affect choices I have in regards to loans/ credit cards etc I haven't applied for credit in a long time but imagine I would be offered higher interest rates on any financial product?

I suppose with a credit card/ stoozing the aim is to debit the credit card balance directly from my account on the same day as I get paid, meaning that money stays in my account for longer/ I can start to pay back the overdraft by leaving money in the account?

getmore4less

SOA /budget same thing

You need to account for a full years spending against income(averaged over the months).


Start a spending diary to see where the money goes this will help adjust the numbers to reality.

Are some of these numbers just for 1? or shared they look low.

hohum wrote: »

Right, found the SOA. Clearly I am being massively optimistic in my figures, appreciate any input as to expenditure I might be missing. Because apparently according to this I have much more than £35 to put towards repayments!

Statement of Affairs and Personal Balance Sheet

Household Information
Number of adults in household........... 2
Number of children in household.........
Number of cars owned.................... 1

Monthly Income Details
Monthly income after tax................ 942
Partners monthly income after tax....... 0
Benefits................................ 0
Other income............................ 0
Total monthly income.................... 942

Monthly Expense Details
Mortgage................................ 0
Secured/HP loan repayments.............. 0
Rent.................................... 250
Management charge (leasehold property).. 0
Council tax............................. 57
Electricity............................. 40 is this on DD looks low if no gas
Gas..................................... 0
Oil..................................... 0
Water rates............................. 13
Telephone (land line)................... 6
Mobile phone............................ 35 look for a better deal
TV Licence.............................. 6.5 that is 1/2
Satellite/Cable TV...................... 7
Internet Services....................... 10
Groceries etc. ......................... 60 100pp is the norm
Clothing................................ 20
Petrol/diesel........................... 0 you have a car
Road tax................................ 0 you have a car
Car Insurance........................... 20
Car maintenance (including MOT)......... 0 you have a car
Car parking............................. 0
Other travel............................ 40
Childcare/nursery....................... 0
Other child related expenses............ 0
Medical (prescriptions, dentist etc).... 13
Pet insurance/vet bills................. 0
Buildings insurance..................... 0 Might be i nthe rent
Contents insurance...................... 0
Life assurance ......................... 0
Other insurance......................... 0
Presents (birthday, christmas etc)...... 20 Stop till out of debt
Haircuts................................ 5
Entertainment........................... 40
Holiday................................. 10 skip this years
Emergency fund.......................... 20
Total monthly expenses.................. 672.5


Assets
Cash.................................... 0
House value (Gross)..................... 0
Shares and bonds........................ 0
Car(s).................................. 0
Other assets............................ 0
Total Assets............................ 0

No Secured nor Hire Purchase Debts

Unsecured Debts
Description....................Debt......Monthly...APR
Natwest overdraft..............1920......0.........17
Student loan approx............14000.....0.........0
Total unsecured debts..........15920.....0.........-


Monthly Budget Summary
Total monthly income.................... 942
Expenses (including HP & secured debts). 672.5
Available for debt repayments........... 269.5
Monthly UNsecured debt repayments....... 0
Amount left after debt repayments....... 269.5

Personal Balance Sheet Summary
Total assets (things you own)........... 0
Total HP & Secured debt................. -0
Total Unsecured debt.................... -15,920
Net Assets.............................. -15,920

Created using the SOA calculator at makesenseofcards
Reproduced on Moneysavingexpert with permission, using Firefox browser.

It is always going to be tight I think you need to consider upping the income.


Do you need the car?

husemin

If you get offered high APR rates on the credit card it does not matter because you will pay this back in full each month, so try and get any crap card, like a cash back card, spend on that, so money satys in your bank then you pay with next months wages. This will get you out of the red a bit!

Its like giving you a months head start and you keep using the credit card untill you pay off the bank OD, like you say above any extra money you make stays in the bank.

BUT be careful not to over spend on the OD.

read the report on stoozing and then read it again.

H

getmore4less

husemin wrote: »

Hi, I agree, if you stop using your bank they could call the OD in and ask for it all back, also if you dont keep an income to the bank of between £500 - £1000 or £1500 a month they may charge you for banking services.

You could get a credit card and do your spending on that instead of using the money in your bank, so that way you dont have to pay the credit card back for a month, at that point you would of been payed (wages) again putting you in positive balance with your bank, its the basic step of stoozing (guide is on this website).

H

There are 2 stratagies here for NORMAL planned spends.

One a card that is paid off in full each month, this keeps the money in the bank for longer and reduces the interest on the OD.

a Zero % purchase CC and just pay the min, this will reduce the OD down over time BUT if they withdraw the OD you are stuck with a CC at higher rates when the 0% runs out, until you know the real surplus I would wait before using this stratagy for the full amount.

A combination could work but needs carefull cash flow analysis which you don't have yet

hohum

Thanks for your comments getmore4less, to give a little more info:

I don't have a car, my boyfriend does. I contribute £20/month to the insurance because he gives me lifts to places, and me being on the insurance brings the cost down. I don't drive.

£40/ mnth electricity is quarterly, my share of split between me and by boyfriend. our last bill (over a very chilly winter) was £240 for 3months. I am not on direct debit because I can't afford for an electricity company to arbitrarily up monthly payments. I'd rather monitor usage. Some of the usage is a landlord supply to a security light in our flats, which we should have a refund on.

£35/ month mobile is 6months in to an 18month contract.

Tv licence = half as split with my boyfriend.

£100 sounds reasonable for food. I split my shop between market and supermarket, prob only spend £70 on actual shop but £30 on coffees and that nonsense. I cook most stuff from scratch. Our supermarket shop is usually £60 between us, that's once a month, plus £30 at the market between us every 2 weeks. Plus pet food, costs about £10/month.

Buildings insurance is not in the rent. We are renting on an err informal basis.

Although there are two of us in the house, I have given figures only for my share.

Things I am not economising on:

I'm not willing to stop buying people presents. I spend up to £20/ per family member for christmas and birthdays, which for me is £20/month.

This years holiday will be a week in a family member's holiday chalet. I have budgeted at £120. That's half the amount I pay in interest on my overdraft. All things considered, I'm taking the holiday.

Income.
Yes, I work in a lowpaid industry! High job satisfaction though. At the moment I have two jobs, one as employee and other as self employed. Should add to that list £12 class 2 NI contributions. It's possible I may need to consider a 3rd income source.

Can I also point out that £14k of my total debt is linked to a student loan, which is a newer style loan repaid through PAYE. I have not yet reached the income threshold for repayments, and at the moment interest on the loan is at 0%.


I have to admit that the idea of using credit cards makes me a bit nervous. What I don't want to do is to increase the amount that I owe. Approach number one of paying the balance off in full sounds more possible? Although I don't know if I would be able to use it because of my not so great credit rating?