Overdraft repayment confusion - help

paulknig

I hope this is the correct place to post this...

I am currently overdrawn in my Lloyds TSB bank account (over the planned overdraft). They have offered to increase my planned overdraft to reduce the bank charges that are incurred. I have agreed to pay back £100 per month to reduce the overdraft - i think about £70 is to pay it off and £30 is interest.

The problem i'm having is how would this appear on my statement? If I pay back £100p/m, where is the money going? Surely I would be paying back my overdraft if I just kept more money in my account?

Sorry for being thick.

jambosans

LTSB will reduce your overdraft each month automatically. Each month on your statement you should see your £100 credit, and the arranged overdraft limit being reduced by £100. This way you always keep within the allowable overdraft limit provided you pay in £100.

YorkshireBoy

I would imagine they've increased the facility to cover your current indebetness, but will reduce the facility by £100 each month going forward.

So, better budget for having £100 less each month (after debit interest) otherwise you'll be in unauthorised overdraft territory again....and next time they might not be so accommodating!

paulknig

Okay. My overdraft limit at the moment is £1000 and i am £1350 overdrawn. they told me they would be increasing the limit to £1750 to reduce charges. Would I be correct in saying the first month would work like this: after paying the £100 back - balance = £1250 o/d and new limit £1650?

paulknig

hi yorkshireboy, at the moment they are charging me around £215 in charges so I'm not going to complain with the £100 repayment. although as I am 18, i can't help think they are giving me a larger overdraft to get futher in debt.

YorkshireBoy

That would be my understanding, yes. However, as I said before I think you're £100 agreement will not include debit interest, so you may find the balance only reduces by £70 (using your figures).

Anyway, you have some leeway (in the form of an extra £400 of facility granted) so no need to panic yet.

stephane_2

If you pay £100 then you would be overdrawn by £1250 but they would still allow you to be overdrawn up to the limit of £1750, unless you request that they reduce your available overdraft limit as you pay money in.

YorkshireBoy

paulknig wrote: »

although as I am 18, i can't help think they are giving me a larger overdraft to get futher in debt.

Then show 'em who's boss and don't get into further debt!

paulknig

many thanks for eveyones help, i hate banks!

stephane_2

One thing you could do if you do not want to get into further debt or you find it difficult to manage your finance would be to open a basic account with another bank with no overdraft facility, just keep in that account what you need to live on and transfer at least £100 to lloyds account until overdraft is paid then ask lloyds to reduce overdraft to a level which you would feel more comfortable to manage

paulknig

think i'll have to give the bank a ring to clarify whether the overdraft limit will change each month. To be honest the reason why i haven't got a clue how it works is i couldn't understand a word the lady was saying on the phone but i didn't want to be rude!