loan to pay off overdraft?

Workingirl_2

Hi all,basically i was wondering if anyone had any advice on paying off a bank overdraft,the limit was £500 but it went £640 overdrawn due to me losing my job and now I am faced with the usual bank charges. All direct debits come out of this bank account and I already have another account with another bank which is £250 overdrawn so can't open another one. I am due to start a new job in afew weeks time so i will be financially better off. The bank that i owe the most to has offered us a £500 loan to pay off the overdraft and i'm wondering if this would be a bad idea taking out a loan to pay off another debt or should i just wait until im working and do my best to clear it? I've never had a loan before so am abit cautious. Any help would be most appreciated.

Gordon_Hose

What's the interest charged on the OD and what's the interest charged on the loan.

If the interest on the OD is lower than the loan, just set up a payment plan with the bank to pay it off. If the interest on the loan is lower than the OD, take the loan to pay it off.

Workingirl_2

Thank you for your reply. I'm not very knowledgeable on percentages etc lol...but interest rate on bank statement says up to 1,200@0.100% and lending at 5.500%. On the letter i got from them it says 'we may charge you interest of 1.5% a month on top of the agreed interest rate on any amounts you are overdrawn.As well as higher interest rates for unarranged borrowing,we may take paid item,unpaid item and letter fees from your account'. The loan they offered was apr 44% and to pay £12.60 per week. Its all confusing to me. :eek:

podperson

OMG stay away from that loan!!!!!!!!! They are basically trying to take advantage of the fact that you are having problems at the moment and will struggle to get credit, 44% is horrendous. Open a basic account, no overdraft, with another bank (co-op is quite good and will give you a basic account even with poor credit) and arrange for the wages from your new job to be paid into this and move over your direct debits - then you can at least afford to pay the day to day bills.
You need to stop using this overdraft and just treat it as any other debt where you are paying £xx a month off it. Put in writing to the bank that this is all you can afford and basically ignore them when they whine and complain they want more.

Gordon_Hose

If the loan is 44% then I wouldn't bother! I think the bank are trying to take advantage of you, obviously they'd make more money if you are paying them 44% interest! That's shocking.

Workingirl_2

Thank you both for your advice,think i'm going to stay away from the loan and do as you said....change direct debits over to a different account and pay off what i can afford weekly.